RTTNews - The Bank of England is set to lower UK's GDP forecasts and warn against the risk of the economy falling into a debt deflation trap, in the Inflation Report to be released on August 12, the Telegraph newspaper reported Monday.

According to the report, BoE Governor Mervyn King will cite this risk as one of the reasons behind last week's move to expand the central bank's quantitative easing measures.

The Monetary Policy Committee's latest inflation and output projections will appear in the Inflation Report.

The newspaper cited Sushil Wadhwani, the former MPC member, as saying that the British economy is tracking the path of Japan, which experienced recovery from its initial crisis in 1990s only to get into stagnation for two decades.

Wadhwani said, The recession is over, in the sense that you will probably now get three to four quarters of a decent bounce - just as Japan did in the early 1990s. Wadhwani added that people think things will then return to normal - but these bounces are driven by temporary factors.

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