By Jonathan Davies

The Bank of England has cut its growth forecast for the UK economy from 2.9% to 2.5% in 2015.

The governor of the Bank of England, Mark Carney, also said the Bank had cut its forecast for 2016 to 2.6%, also down from 2.9%.

Mr Carney also told MPs in his quarterly inflation report that interest rates are likely to rise in around a year's time. Interest rates have been at the record low of 0.5% since 2009.


Mark Carney also said he is relaxed over low inflation.

Following six weeks of silence in the run-up to the general election, Mr Carney said that it will "pick up notably" towards the end of the year.

With inflation at zero, Mr Carney also said that deflation is not a serious, long-term concern. He said: "A temporary period of falling prices should not be mistaken for widespread and persistent deflation."

Inflation has been consistently below the Bank of England's target of 2% over the past year. But the governor says a sharp fall in energy prices, lower food prices and strong sterling account for around three quarters of the fall in inflation.

But the Bank of England is forecasting inflation to return to its target of 2% within two years, and then to rise slightly above.