Britain’s economy is already showing “distinct signs of an upturn” after slipping into recession at the end of last year, the Bank of England’s governor said on Tuesday.
Andrew Bailey predicted that the UK would be hit by a “very small recession”.
He also said inflation was set to fall to around two per cent in the spring but then to pick up slightly later in the year.
Appearing before the Commons Treasury committee, Mr Bailey said: “Against a lot of talk about what is we think is going to be a very small recession, we think the economy is already actually showing distinct signs of an upturn.”
He stressed that compared to recessions dating back to the 1970s, the 0.5 per cent cumulative reduction in gross domestic product (GDP) in the third and fourth quarter was "the weakest by a long way".
"We have a very precise definition of a recession in this country as two successive quarters of negative GDP growth," he told the MPs.
"The two successive quarters... last year, I think, cumulatively add up to minus 0.5 per cent on GDP.
"If you look at recessions going back to the 1970s, this is the weakest by a long way because the range, I think... for those two quarters for all the previous recessions was something like 2.5 per cent to 22 per cent in terms of negative growth, so minus 0.5 per cent is a very weak recession."
Fellow Bank of England interest-rate setter Dr Ben Broadbent pointed out that other countries, including the US, define recessions in different ways.
The upturn prediction by the governor will be welcome news for Jeremy Hunt ahead of his March 6 Budget.
The Chancellor has signalled that he will have limited room for tax cuts next month.
But the Government is hoping that the economy picks up in time for the next general election, expected in the autumn.
Millions of families have seen their mortgage bills, or rents, rise, which has been partly blamed on Kwasi Kwarteng’s disastrous mini-Budget in September 2022 during Liz Truss’ brief premiership.
Inflation hit 11 per cent over a year ago triggered higher by Vladimir Putin’s war in Ukraine, and supply difficulties after the Covid pandemic.
Rishi Sunak met his target to halve inflation but has so far yet to do so on growing the economy, cutting debt, reducing NHS waiting lists and “stopping the boats” crossing the Channel.
Many households are still struggling to make ends meet after the cost of food and other goods spiralled, though, average wage increases have recently outpaced inflation.
Mr Bailey said the recession that the UK entered at the end of last year was "very weak".
"We have a very precise definition of a recession in this country as two successive quarters of negative GDP growth," he told the Treasury Select Committee.
"The two successive quarters ... last year, I think, cumulatively add up to minus 0.5% on GDP.
"If you look at recessions going back to the 1970s, this is the weakest by a long way because the range, I think, for the numbers for those two quarters for all the previous recessions was something like 2.5% to 22% in terms of negative growth, so minus 0.5% is a very weak recession."
He added: "I think there's two ways that the UK grows, first of all by restoring price stability, that's a condition for stable growth. I think we're well on our way to doing that.
"The second thing is - and this is part of the narrow path we're having to walk here - that we've got weak supply side growth in this country and we have had for some time. So, clearly, to get faster growth, we do need to see stronger growth on the supply side."
The governor also said that inflation does not need to reach the Bank's two per cent before it starts cutting interest rates.
"I'm looking for more sustained progress on ... three things which really are the more persistent elements," he told the Treasury Select Committee.
"We've seen, I think, encouraging signs on them. So, services inflation is still above six per cent, there are some signs of it coming down now.
"I think some signs that pay is now adjusting down towards the lower headline inflation, which is what I'd expect to see.
"The quantity side of the labour market remains tight, there's no question about that.
"But it's the progress of those three things.
"We don't need inflation to come back to target before we cut interest rates, I must be very clear on that, that's not necessary.
"We'll be looking for sustained progress on those things to reach that judgment about how long this period of restrictive policy needs to be."
A member of the Bank of England's Monetary Policy Committee has said that if the Bank keeps interest rates high "for longer" that would weigh on parts of the economy.
Speaking to the Treasury Select Committee, ratesetter Swati Dhingra said: "Despite the disinflation at play, and despite the fact that there has been some real wage recovery, we're still seeing consumption very weak and very different from some of the other advanced economies where there has been a bounce back from the pre-pandemic levels.
"Here, we aren't seeing that, even after January's retail sales, unfortunately, (retail sales are) about 2.1% lower.
"I think that suggests to me that the downside risks at this point are substantial and, therefore, if we keep monetary policy tight for longer, that would weigh even further on that sort of real relativity."
