By Maximilian Clarke
The UK’s weak growth prospects, as outlined in the Bank of England’s Quarterly Inflation Report, have been labelled as ‘optimistic’ by the British Chambers of Commerce (BCC).
The report predicts the UK economy will remain stunted until mid 2012 at which point growth will accelerate. The BCC, however, predict that, owing to the weak domestic demand exacerbated by the government’s austerity measures, only moderate growth will resume in 2012. Both the Bank and the BCC have all but rules out the prospect of a return to recession.
Commenting on the report, David Kern of the British Chambers of Commerce said:
“The latest Inflation Report highlights the difficult economic circumstances facing the British economy over the next two years. We agree with the Bank’s prediction that given the serious problems in the eurozone and the impact of the domestic austerity plan, UK growth will stay weak over the next few quarters, though a recession is unlikely.
“However, the improvement in growth envisaged in the Inflation Report from the second half of 2012 appears too strong. Previous reports have constantly overestimated the economy’s growth outlook, and we are concerned this may be happening again. While a modest improvement is probable from mid-2012 onwards, this will be relatively weak. We must accept the fact that the economy is facing a long, hard slog over the next few years.
“We agree with the Bank’s judgment that inflation will fall sharply in 2012, which will allow the MPC to keep interest rates low and maintain an aggressive QE programme. But we would urge the committee to reassess its reluctance to purchase private sector assets, and take further measures to reinforce the credit easing programme that the Chancellor is set to announce in his Autumn Statement.”
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