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Chancellor backs Sir Mervyn's report on the economy

8 August 2012 Last updated at 17:31 BST

The Bank of England has reduced its growth forecast - warning that the economy will grind to a halt this year.

In his quarterly inflation report, the bank's governor, Sir Mervyn King, said there would be virtually zero growth in 2012 as a whole.

However, he revealed that inflation was now expected to hit the Government's 2% target towards the end of this year.

The Chancellor of the Exchequer, George Osborne, broadly agreed with Sir Mervyn that the economy was healing but that it was a "slow and difficult process".