LONDON (SHARECAST) - In a wide-ranging interview with The Times the Bank of England´s Chief Economist, Spencer Dale, warned earlier today that the pace of economic growth will be “materially” lower in the final quarter and that Britain will remain trapped in a period of sluggish expansion.
Meanwhile, inflation is likely to accelerate back towards 2.5% in the next few months because of the recent increases in energy prices, damaging household incomes.
Additionally, he commented on how: “Inflation with a ‘2’ in front of it is encouraging, but normally we would have expected [in] an economy this weak for inflation to be quite a bit below target, and we are not seeing that (…) This stickiness in inflation is something we need to take into account when we are thinking about exactly how much more stimulus we need to apply.”
That said, there are circumstances in which Mr Dale said he could imagine voting for fresh quantitative easing.
As well, he raised concerns about the recent gains by the pound Sterling, saying that they were “not good for us in terms of keeping this sort of rebalancing of the economy [towards exports] (…) I think it is something we are keeping a close eye on (…) If the exchange rate shifted up very dramatically, other things being equal you would have to take that into account in terms of policy.”
Lastly, Mr.Dale waxed optimistic about the Bank’s new programme of cheap loans for banks, known as the Funding for Lending Scheme (FLS). In particular, he believes that longer term there is no reason why Britain cannot post the strong growth rates it enjoyed before the financial crash, although the next couple of years will see relatively weak growth.