<p><br /> Bank of England boss Mervyn King has said Tuesday's grim GDP figures serve as a stark reminder that Britain's recovery will be "choppy" as he braced consumers for a bleak year ahead.<br /> </p><p><br /> In a speech at Newcastle's Civic Centre, the Bank Governor warned Britons to expect inflation to rise to between 4 per cent and 5 per cent over the next few months.<br /> </p><p><br /> Real wages will plunge back to 2005 levels as prices soar and the Government's deficit-busting actions take effect, he added.<br /> </p><p><br /> While the economy was "well placed to return to sustained, balanced growth", Mr King outlined strong headwinds facing the economy in 2011.<br /> </p><p><br /> Rising unemployment and declines in real earnings will hit spending in the private sector, with the public sector hammered by Government spending cuts.<br /> </p><p><br /> But it was inflation that was the Governor's biggest immediate headache.<br /> </p><p><br /> There have been calls for action after inflation rose to 3.7 per cent in December, far higher than the Bank's 2 per cent target.<br /> </p><p><br /> Tuesday's GDP figures will have taken some of the heat off the Bank to increase rates, but they also highlight the difficult situation faced by policymakers.<br /> </p><p><br /> With the economy veering dangerously close to stagflation, the Bank is hampered in its ability to address either growth or inflation without making the other worse.<br /> </p>
