Governor of the Bank of England warns Britain is headed for recession

Unveiling the bank's quarterly inflation report, Mervyn King warned of a tough economic year ahead, with inflation likely to peak just below five per cent, then returning to target levels within two years.

His comments came as new unemployment figures showed their biggest monthly rise in 15 years.

The jobless total is now up to 1.67m, an increase of 60,000 in the three months up to June, giving a new unemployment rate of 5.4 per cent.

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