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The Bank of England is downgrading its growth forecast for 2013 to just 1%, Sir Mervyn King has announced.
Delivering the Bank's inflation growth report, the governor said the economy was "travelling in the right direction", but warned of a "slow and protracted recovery" in the months to come.
Sir Mervyn also said inflation was not likely to fall towards the Government's 2% target until the second half of 2013 - later than previously expected.
"The immediate economic outlook remains a challenging one. Growth is likely to remain sluggish and inflation above target. The road to recovery will be long and winding," he told a press conference.
"But there are good reasons to suppose that we are travelling in the right direction. The Committee remains committed to do whatever it can to keep us on the right path."
Shadow Chancellor Ed Balls this afternoon claimed the "sobering" report highlights the Government's "misplaced" economic strategy.
"The complacent thing for the government to do now is simply sit back and hope things will get better, but the cautious approach would be to act now to secure and strengthen our economic recovery," he said.
Treasury minister David Gauke said rising prices and the crisis in the eurozone would continue to have an impact on the UK, but insisted the economy was "moving in the right direction".
"I think the point to make here is that clearly there are significant international pressures on our economy that mean that this is going to be a long and challenging recovery from a very substantial financial crisis" he told the World at One.
"That is what we’re going through at the moment. And I think the British people understand that this is going to be a long process. There is no magic lever here."
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Summaries and transcripts from TV and radio
1 hour ago on Today, BBC Radio 4
2 hours ago on Today, BBC Radio 4
17/09/2014 on World at One
45 minutes ago