The U.K. economy resumed growth, expanding by 0.1 percent in the fourth quarter.

Annual gross domestic product growth will reach about 3.2 percent in the second quarter of 2011, compared with about 4 percent previously, the central bank's predictions show. Inflation will peak at about 3.3 percent before slowing as low as 0.9 percent and staying below the goal of 2 percent.
``The committee judges that while the most likely path for growth is somewhat weaker, some of the downside risks are smaller than in November,'' the bank said in its quarterly report today in London. ``It is more likely than not that inflation will be below the target for much of the forecast period, but the risks are broadly balanced by the end.''
Bank of England policy makers are weighing the threat of accelerating inflation against the risk of a relapse in growth after the economy barely expanded in the fourth quarter. Pre- election uncertainty on the prospects for the budget deficit also clouds their forecasts at a time when investor concern on European sovereign debt is gripping financial markets.
The central bank's forecasts are published as fan charts. They are based on the outcome for the economy if the benchmark interest rate, currently at 0.5 percent, rises to meet market expectations of an average of 1 percent in the fourth quarter of 2010 and 2.5 percent in the same period in 2011.
Constant Rates
On the basis of constant interest rates, the forecast also show inflation will undershoot the target.
The inflation rate jumped by 1 percentage point in December, the most since records began in 1997, to 2.9 percent after oil prices surged and 2008 cuts in sales tax and retail prices weren't repeated.
``The risks around the most likely path for inflation are judged to lie on the upside, reflecting the possibility of further increases in commodity prices and the risk that a sustained period of above-target inflation might cause inflation expectations to rise,'' the bank said.
The U.K. economy resumed growth, expanding by 0.1 percent in the fourth quarter. The weakness of the recovery poses a challenge to officials as they consider whether the economy is strong enough to start withdrawing emergency stimulus measures.
The bank reiterated that its forecasts point to a ``gradual recovery'' for the economy.
Prime Minister Gordon Brown has said the biggest mistake Britain could make would