The Bank of England on Wednesday unveiled the biggest single downward revision in its inflation outlook since it gained independence in 1997 and said it was “very likely” that Britain was already in a recession.

In its quarterly Inflation Report, the Bank forecast that national income could shrink by one to two percentage points over the next few quarters and growth would probably be flat by the end of next year. Consumer price inflation, which at its last reading registered an annualised rate of 5.2 per cent, will fall to its target rate of 2 per cent by the middle of 2009.