Most
data over the past month has suggested that Britain's stalled recovery
is finally getting back in gear, and on Tuesday the International
Monetary Fund revised up its economic growth forecast to 1.4 percent
this year and 1.9 percent for 2014.
Nonetheless,
output remains well below pre-crisis levels, in contrast to other major
economies, and the central bank believes the economy has plenty of
scope to grow further without generating domestic inflation pressures.
Industrial output fell unexpectedly in August as factories cut production, data showed on Wednesday.
This
helps explain why the Monetary Policy Committee pledged in August not
to raise interest rates before the unemployment rate falls to 7 percent -
something it forecasts will take three years - unless inflation
threatens to get out of control.
"They
should probably be firmly sat on hold this month, next month and for
several months to come," said Alan Clarke, UK economist at Scotiabank.
Clarke,
like most other private-sector economists, expects unemployment to fall
more quickly than the BoE forecasts, and financial markets think a
first rise in interest rates from their record-low 0.5 percent could
come as soon as early 2015.
Unemployment
currently stands at 7.7 percent, while consumer price inflation of 2.7
percent has exceeded the BoE's 2 percent target since December 2009 and
is not forecast to be back on target until late 2015.
More
economic stimulus in the form of asset prices now looks unlikely, as
the two policymakers who backed it earlier this year, Paul Fisher and
David Miles, have said they would prefer to keep it in reserve until the
economy weakens.
The main immediate threat on
the horizon is the risk that the United States government shutdown
escalates into a default on US government debt, something which Fisher
said could be extremely serious for markets and the economy.
No comments:
Post a Comment