Bank predicts 'modest and sustained' recovery but inflation to remain stubbornly high Growth should pick up to 0.5 per cent in second quarter of this year Inflation set to peak at 3.2 per cent after the summer Sir Mervyn king, presenting last forecast, says 'recovery is in sight' By Adrian Lowery The UK economy will undergo a 'modest but sustained' recovery, the Bank of England said today - but inflation will remain 'stubbornly high'. The Bank said growth should pick up to 0.5 per cent in the second quarter of this year but it warned that the hangover from the financial crisis would ensure the recovery is weak and uneven. Presenting his last quarterly inflation report as Bank Governor, Sir Mervyn King added that inflation - which currently stands at 2.8 per cent - is likely to edge higher in the coming months, but will come down quicker than was expected three months ago. The Bank's GDP projections do not estimate yearly GDP growth to rise much above 2% in the next few years. 'Today's projections are for growth to be a little stronger and inflation a little weaker than we expected three months ago. That's the first time I've been able to say that since before the financial crisis,' King told reporters. The report saw inflation peaking at 3.2 per cent after the summer and falling back towards the Bank's 2.0 per cent target in two years' time. That was lower than a forecast of 2.3 per cent the Bank made in February, which unsettled some in financial markets as it meant inflation would not return to target until the first quarter of 2016. The governor, who hands over to Mark Carney in July, said: 'This hasn't been a typical recession and it won't be a typical recovery. Nevertheless a recovery is in sight. The Bank's forecasts are more upbeat than those it made three months ago. Since then, official figures have shown growth of 0.3 per cent in the first quarter and recent surveys for April showed improvements for the services and manufacturing sectors, and near-stabilisation for the struggling construction sector. But David Kern at the British Chambers of Commerce felt 'the positive trends outlined within Governor King's final Inflation Report appear to be too optimistic'. Sir Mervyn King presents his last quarterly inflation report as governor of the Bank of England, before Mark Carney takes over July. We accept that growth is likely to remain positive, but believe that the speed of the recovery will be somewhat slower than the Governor indicated. The grim eurozone data also shows that our exporters will face obstacles over the year ahead. We also think that the inflation outlook is slightly worse than the report suggests, and future falls in 2013 and 2014 will not happen as quickly. Sir Mervyn said the Bank is performing a difficult balancing act on inflation. He added: 'We would like inflation to come down much faster. We are certainly not happy with the present situation but it does not follow from that that the best thing to do is to raise interest rates and push the economy into recession. He said attempting to slash inflation too quickly would mean even slower growth and higher unemployment. Unemployment data today showed a rise of 15,000 jobless between January and March to 2.52million. The unemployment rate now stands at 7.8 per cent, the third quarterly increase in a row in the jobless total. The Bank's projections for CPI inflation see price rises surging to over 3% later this year, before dropping back. The figures suggest the recent period of falling unemployment "seems to have come to an end," an ONS spokesperson told the BBC. Last week it emerged that the second recession in 2011/12 - which economists had for some time pointed out was only marginal - may never have happened, after construction sector data from the first quarter of 2012 was revised by the ONS to show it did not fare quite as badly as previously thought. Hopes that the UK's recovery may be gathering momentum have stayed the Bank's hand on more quantitative easing in recent months. The Bank said economic stimulus including QE and its credit-boosting Funding for Lending scheme will support the recovery and get households and businesses spending again, although it added that the main risks continue to come from abroad. The Bank's monetary policy committee has held its asset purchase scheme steady at £375billion while it looks for further signs a lift from the FLS. The Bank and the Treasury recently widened the scheme to unblock the credit logjam for small firms. Chancellor George Osborne gave the Bank a looser remit on inflation in his March Budget, allowing it to tolerate longer periods of above-target inflation in favour of economy-boosting measures. Sir Mervyn has chaired every inflation report press conference since the Bank began publishing forecasts back in 1993, when he was its chief economist. The economy grew by 0.3 per cent in the first three months of 2013, avoiding the third recession since 2008, the Office for National Statistics said - but evidence has emerged that the second dip might not have been an official recession. How UK GDP has fluctuated since 2000, according to ONS figures.