Sunday, 29 May 2011
Britain faces bleak two years after feeble economic growth
Britain faces a bleak time for the next two years as a result of feeble economic growth, one of the Bank of England’s most senior officials warned on Friday night.
Spencer Dale, the Bank’s chief economist, said households would need to consume less and he indicated that interest rates would rise this year.
He said he was worried about the persistently high levels of inflation and the weakness of the economic recovery. Mr Dale said that there were “relatively hard times ahead”.
The gloomy comments were made despite an official poll finding a sharp rise in consumer confidence in May as Britons enjoyed unseasonably warm weather, several bank holidays and the royal wedding.
Mr Dale said: “What we’re going through is part of a rebalancing where in the economy as a whole we need to consume less … We need to invest more and export more to the rest of the world.
“Part of the squeeze we’ve seen in real incomes is associated with that rebalancing, which fiscal policy can’t do anything to offset.
“The next year or two will be a relatively bleak time, but I think we are starting towards a path of sustainable recovery.”
He said: “I’m worried about growth remaining feeble and I’m worried about inflation remaining high. That’s the dilemma facing the Monetary Policy Committee, in balancing these two very significant risks.”