In its inflation report the Bank of England revised down its growth forecasts marginally and revised up its inflation forecasts, though they still point to consumer price inflation staying below the 2% target over the medium-term. Mervyn King, the governor, insisted the monetary policy committee would not hesitate to reverse both quantitative easing and current very low interest rates when circumstances warranted it.
The main message, however, was that the outlook is hugely uncertain. “Promising signs” that the pace of decline has begun to ease might not mean that a sustainable recovery will follow. Bank lending is more subdued than the Bank hoped in February and the supply-side of the economy has been damaged. The inflation report can be accessed here.
Originally published at David Smith Economics UK and reproduced here with the author’s permission.