EXPERTS at the Bank of England have stuck by forecasts for an economic recovery later this year.

The Bank's quarterly inflation report said expectations for growth and inflation had changed little since its last update in November.

It admitted that "considerable uncertainties" surrounded the predictions, but that longer term prospects for world output remained positive.

The report said: "The prospect is still for a steady recovery during the latter part of this year and beyond."

The Bank of England's deputy governor for monetary policy, Mervyn King, said: "The slowdown has been sharp and synchronised across countries, but there are now tentative signs of an upturn."

However, the Bank admitted there was a risk of inflation due to higher import prices brought about by a falling exchange rate.

The Bank also warned that monthly inflation movements were likely to be erratic in the near term, due to a number of one-off factors.

That was shown on Tuesday by an earlier-than-expected rise in the underlying rate of inflation to 2.6 per cent during January.

The increase, which reflected higher year-on-year petrol prices, was only the second time the figure had burst above the Bank of England's target rate of 2.5 per cent since March 1999.

But yesterday's report said inflation was likely to stay around that level in the long term.