Bank of England governor Andrew Bailey is expected to row back on forecasts about the UK’s looming recession as the latest data is likely to show an improving outlook.

The Bank will publish its latest quarterly Monetary Policy Report on Thursday with analysts now saying the governor overplayed warnings of a deep downturn that could put up to a million people out of work.

Expectations of a recession remain , but a top fund manager said Mr Bailey will backtrack on his comments, producing a ‘relatively improved outlook’. 

Toscafund chief economist Savvas Savouri told the Mail: “The BoE’s grossly exaggerated expectations for UK unemployment and inflation contributed in no small way to the dire GDP forecasts it published in the Monetary Policy Reports of August and November 2022.

“Expect Bailey to suggest the UK still faces recession, but one shorter and milder than the one he had outlined through last year. We expect the length of his recession forecast to be cut in half – a ‘softer landing’.”

Philip Shaw, chief economist at financial services firm Investec, also said he expects Mr Bailey to move away from the gloomy forecast.

The Bank, the US Federal Reserve and the European Central Bank will all make their decisions on interest rates on Wednesday and Thursday and are expected to diverge in their battles against inflation after a year of co-ordinated tightening.

The ECB, which held back on raising rates last year, has become the most hawkish, warning investors that it will continue with monetary tightening.

The Bank of England’s next move has divided analysts between those expecting another 50 basis-point rise or a smaller increment of 25 points.