The number of times the Governor warned the Bank had cut its expectations for productivity growth was striking, writes Ed Conway.
Rarely has the world, or for that matter the UK economy, been as exciting (terrifying might be a better word) as it has been for the past few years.
Perhaps we should be relieved, then, that the Bank of England is now doing whatever it can to make it seem far less exciting and far more boring than that.
The latest Inflation Report was a prime example: Britain’s economy is recovering from the crisis, but is still deeply vulnerable to any matter of factors – the rising pound, the ballooning current account deficit, the Greek crisis, the domestic housing crisis, the sharp falls in international bond markets.
However, the Bank’s attitude to monetary policy – for which, read interest rates – remains steady as she goes.
The Bank notched down its growth forecast for the UK economy but didn’t drop any major hints that it would be lifting interest rates sooner than next spring (which is when investors currently expect it).
It said even an intensification of the Greek crisis would have little impact on UK growth.
In a letter to the Chancellor to explain why inflation had dropped so far below target (it is currently 0%, compared to the Bank’s 2% target), the Governor said CPI inflation could drop into negative territory, but would soon rise back towards target. Nothing to see there.
To read this article in full please go to the source: Productivity At Heart Of UK Growth Concerns