Economic activity may stay under-par, warns bank chief

In a speech about the difficulties of communicating economic forecasts, King reiterated that absolute levels of economic activity would be well below those present before the credit crunch, despite stronger growth in the future.

"Even if growth rebounds, the level of activity is still very

likely to remain weak for a considerable period compared to the peak at the start of 2008.

The economic environment is likely to continue to feel far from normal for some time," he said in a lecture to scientists at the Royal Society.

"It is ultimately the level of activity, rather than its growth rate, that matters for employment and the degree of inflationary pressure," King said.

King said the Bank's Monetary Policy Committee believed that recent GDP data would be revised higher, but not by enough to override the broad theme of a big decline in output shown in the central bank's quarterly Inflation Report.

January inflation data released after the publication of the last Inflation Report in February was in line with the central projection given by the Bank.

"It now looks even more likely that inflation in the first quarter of 2010 will be close to the middle of the MPC's fan chart. Thereafter, the MPC expected that inflation was more likely than not to fall back and be below target for a period," King said.

The Office for National Statistics is due to publish February inflation data today, which economists forecast to slow to 3.1 per cent from January's 14-month high of 3.5 per cent – well above the bank's 2.0 per cent target.

The economy crept out of recession in the fourth quarter of last year, growing by 0.3 per cent.

Mr King also discussed potential new ways to present the Bank's growth and inflation forecasts, including explicit probabilities of it being above the two per cent target at certain points in the future, as well as a "probability ribbon" which would give a range of likelihoods that inflation would be on target.