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Mervyn King downgraded the expansion forecast and raised the inflation prediction, setting off a string of negative reactions in trading and currency venues.
The pound plummeted on Forex markets following the financial expert's comments, losing one per cent against the dollar and dropping to 83.05p per euro, from a previous value of 82.87p.
Mark Bolsom, head of the UK trading desk at Travelex Global Business Payments, remarked: "Today's Quarterly Inflation report has been a bit of a reality check."
And Forex traders may not be encouraged to buy the pound in the near future, as the Bank continues to favour quantitative easing strategies and fiscal tightening does not appear to be on the horizon.
In May, the central bank had predicted growth of around 3.6 per cent in its 24-month forecast, but experts may no longer be so optimistic.
Posted by Sara Secker
