The Bank of England has revised its forecasts for the UK:
- Growth: The UK economy is now expected to grow 2% in 2017, compared with a November forecast of 1.4%. In its final forecasts before the referendum, in May last year, the bank had forecast 2.3% for 2017
- The economy is expected to grow 1.6% in 2018, compared with 1.5% forecast in November. The forecast for 2019 is 1.7%, versus 1.6% forecast in November.
- Taken together, the upgrades to previous forecasts amount to 1% over three years
- Inflation: It is expected to be 2.0% this quarter, 2.7% in early 2018 and 2.6% in early 2019. That compares with November forecasts of 1.8%, 2.8% and 2.6%, respectively.
- Unemployment: forecasts have been revised down. Expected to be 4.9% this quarter, 5.0% in early 2018 and 5.0% in early 2019. That compares with November forecasts of 5.0%, 5.5% and 5.6%, respectively.
They are considerably more optimistic than me. They still think Brexit has caused problems, but are more optimistic than they were. Given that, if anything, the uncertainties around Brexit have increased this seems wildly optimistic.
So, let me suggest a hypothesis. Suppose the Bank wants to suggest things are going well. And at the same time that inflation is rising. What's the obvious consequence? It is, of course, a rate rise, which they can deliver. And the result of that would be massively increased uncertainty: we have no idea how households would react to such a change. Many will struggle. And maybe that's precisely what the Bank wants. They may want to get a recession in early to demonstrate the cost of Brexit whilst change might still be possible. Trump's policies just help all that along.
Am I being too conspiratorial? Who knows? but it would make sense from the City's perspective.
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Economists do not seem to be very good at predicting the future it is commonsense that inflation will rise if sterling falls I do not understand what their function is anymore.
We survived in the 1980s and 1990s with high interest rates so why not now.
The only real concern to me is the amount of investment we will get from foreign companies
The Bank of England does not seem to be fit for purpose growth looks good employment is good as well which means the deficit will come down and cuts to public services maybe reduced
Funny I seem to remember a tripling of unemployment, decimation of industry and surge in house repossessions in the 1980s.
Known within Conservatives circles as the happy times.
To think cuts to public sector will be reduced is definitely delusional- this government wants to destroy the welfare state and will use Breix to do so. I would look at what May is doing and what she doesn’t say rather than what she says. She has no intention of putting any more money into the NHS and only allowing Local authorities to increase council tax slightly to help stave off total collapse of social care. Meanwhile, in case you haven’t noticed they are planning on reducing local tax offices, cutting the number of Job Centres – etc etc.
People are in a very different place now compared to when interest rates were high – many with huge debts and gigantic mortgages and they will not be getting pay rises – boom time for bankruptcy / debt companies coming.
Re the last, oh yes, very true
Won’t a huge rise in mortgage defaults hurt the banks? Won’t it reveal them as insolvent? Won’t they then have to turn to the BoE for more QE to get rid of their useless paper? Isn’t this one more step towards the ‘one bank to rule them all’ scenario postulated by some?
I am unaware of the last issue
As to the former: experts don’t foresee the consequences of their actions
If the forthcoming recession is induced early, then presumably the recovery will probably commence earlier also, ideally timed for 2020 ?
Maybe….
Considering the low baseline that the next recession will proceed from I really wonder if there will be a recovery. Certainly if they try Osborne’s growth by deflation strategy again we may be looking at ten years or more. Or until the next Labour government if that is sooner.
This isn’t the 1980’s: the economy is fundamentally different. There is not and cannot be an upward pressure on wages: the working classes and the middle classes have no leverage and no bargaining power whatsoever.
All that they can do is swallow higher rents by cutting back on consumption; and there’s no lower limit to that. Not even when the food banks run out.
The Bank needs to look for economic levers that apply a downward pressure on rents and wealth concentration by squeezing from above, not by compressing a segment of the population who appear to be all too compressible to no effect.
And they need to ditch the ‘pushing on a string’ analogy for policies that do that: it isn’t string, it’s people, and current economic policies are squeezing out the productive economy.