The UK looks set to avoid a ‘double-dip’ recession, though fear of over inflation remains.
Thursday, February 4th, 2010A Bank of England rate-setter has said that the UK should avoid a dreaded “double-dip” recession but warned that fears over inflation remain.
Andrew Sentance of the Monetary Policy Committee (MPC) stated that the current world economic climate coupled with the weak pound should offset the impact of the struggling banking sector and the impending action to approach the deficit of the UK budget.
“As long as the international economy continues to grow healthily, I believe we should avoid the feared “double-dip” recession,” stated Mr Sentance, one of the MPC’s rate “hawks”, only a day after the confirmation of a weak return to growth.
He went on to add that the recovery rate would remain uncertain, and that early action would be necessary to hike rates from the record lows, in order to keep inflation under control. This is important to note given that inflation has been above the Bank’s target of 2% for the most part of the past three years.
Mr Sentance went on to say that due to the recent fall in the value of the pound, the UK cannot be reliant on cheap imported goods to hold down prices. Despite the fall in output, the rising cost of imports is keeping the inflation above target. There could also be less slack in the labour market to bring down prices, as unemployment is lower than was expected.
He also said that due to the ease on lenders, there was plenty of room for recovery in house prices over the next few years, which has been at a historical low level.
