Inflation report shows extent of economic challenge, says BCC

Monday 19 November 2012

City of London

The Bank of England's inflation report has painted "a grim but realistic outlook" for the UK economy over the next two years, it has been claimed.

David Kern, chief economist at the British Chambers of Commerce (BCC), explained that the forecast shows lower growth and higher inflation than in the previous quarterly report.

It also acknowledges that the economy is unlikely to return to its pre-crisis growth path for some time, he stated.

"While this [is] not an ideal situation, there is no justification for doom and despondency. UK businesses have accepted and are realistically adjusting to current market conditions," Mr Kern noted.

"Although the rate of growth will be more modest than we would wish, the economy is expected to grow steadily over the years ahead."

He said the government should accept that the private sector must be the main driver of any sustainable recovery, and therefore should adopt the necessary growth policies that will make such future growth possible.

“In policy terms, the new report confirms that further increases in quantitative easing (QE), though not totally excluded, are unlikely to take place in the foreseeable future," Mr Kern added.

He said the less-favourable outlook for inflation is "unwelcome news" for the UK economy, and additional QE should not be used to limit falls in inflation in the second half of 2013 and beyond.

Posted by Steve Williams