BoE’s Executive Director forecasts rough seas for UK economy

Spencer Dale, Executive Director of the Bank of England and member of the Monetary Policy Committee, has provided a bleak outlook for the UK’s economic growth.

Dale cautioned that prospects for growth have been limited in the wake of Chancellor Osborne’s stringent austerity plans and measures in a recent interview with the Independent.  The MPC member also warned that both the inflation rate and the unemployment late will more than likely rise, something that will have far-reaching effects on financial instruments such as interest rates on business loans.

Adding that the country’s economic health would not return to the levels it occupied prior to the global economic crisis for quite some time, Dale commented that, in light of the inflation rate has increasing slightly higher than expectations and the VAT news from the budget in June, the target date for returning the inflation rate to acceptable levels will not be achievable until late next year.

While  Andrew Sentance, another BoE Monetary Policy Committee member, voted for raising interest rates at July’s meeting, Dale did not join him in doing so despite his concern for the high rates of inflation.

The Monetary Policy Committee uses the inflation rate of the Consumer Price Index as a benchmark, and while the inflation rate has not fallen as quickly as some would have hoped, there are policy makers that are continuing to keep the current interest rates at 0.5 per cent, which, since March of last year, have been historically low;  since the MPC’s inception in1997, interest rates have started at just over 6 percent and hit an all-time high of over 7 per cent a year later before fluctuating until the inception of the global economic crisis in 2008.

Dale concluded by affirming that the MPC and the BoE knows the evils of a rampant inflation rate, cautioning that those policy makers in regulatory roles have to demonstrate an incredible amount of vigilance to manage the recovery of the economy properly.

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