BOE sticks to policy as UK on path of recovery
Source: Agencies |
April 6, 2012, Friday
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Print Edition
Print Edition
THE Bank of England held back from giving Britain's fragile recovery an extra boost yesterday, as the economy appears to have avoided falling into recession despite a shock drop in manufacturing output in the first months of this year.
The economy has not recovered fully from the 2007-2009 recession that left Britons poorer and vulnerable to the eurozone debt crisis, which fueled a fall in output at the end of last year and raised fears of a new downturn.
A surprise 1 percent dive in manufacturing output in February, announced earlier yesterday, showed that the economy was still on shaky ground after a series of more upbeat business surveys had indicated that a modest recovery was on track.
Bank of England Governor Mervyn King has warned of a long and arduous road back to economic health, predicting a bumpy ride for most of 2012 as the dangers from the euro debt crisis linger and events such as an extra public holiday for the Queen's Diamond Jubilee distort the course of the economy.
Even a minor technical recession - defined as two consecutive quarters of falling GDP - would be a blow for finance minister George Osborne, who defended his tough austerity plan aimed at erasing a huge deficit in last month's budget.
At its monthly meeting yesterday, the central bank's Monetary Policy Committee left the total of its asset purchases at 325 billion pounds (US$515 billion) and kept interest rates at their record low of 0.5 percent, a move that had been expected by analysts.
"Since the end of 2011, when many were extremely concerned about an economic meltdown in the eurozone, the short-term outlook has improved," said Scott Corfe, of economics consultancy CEBR. "For the UK at least, it looks as though a recession this year will be avoided."
Most economists believe the BOE will not expand its quantitative easing program this year, and the recent output figures did little to change that view. But they said Britain should return to growth in the first three months of 2012 as the wider measure of industrial output grew in February thanks to increased energy production.
Nonetheless, the government predicts growth of just 0.8 percent this year, only a fraction more than in 2011.
The economy has not recovered fully from the 2007-2009 recession that left Britons poorer and vulnerable to the eurozone debt crisis, which fueled a fall in output at the end of last year and raised fears of a new downturn.
A surprise 1 percent dive in manufacturing output in February, announced earlier yesterday, showed that the economy was still on shaky ground after a series of more upbeat business surveys had indicated that a modest recovery was on track.
Bank of England Governor Mervyn King has warned of a long and arduous road back to economic health, predicting a bumpy ride for most of 2012 as the dangers from the euro debt crisis linger and events such as an extra public holiday for the Queen's Diamond Jubilee distort the course of the economy.
Even a minor technical recession - defined as two consecutive quarters of falling GDP - would be a blow for finance minister George Osborne, who defended his tough austerity plan aimed at erasing a huge deficit in last month's budget.
At its monthly meeting yesterday, the central bank's Monetary Policy Committee left the total of its asset purchases at 325 billion pounds (US$515 billion) and kept interest rates at their record low of 0.5 percent, a move that had been expected by analysts.
"Since the end of 2011, when many were extremely concerned about an economic meltdown in the eurozone, the short-term outlook has improved," said Scott Corfe, of economics consultancy CEBR. "For the UK at least, it looks as though a recession this year will be avoided."
Most economists believe the BOE will not expand its quantitative easing program this year, and the recent output figures did little to change that view. But they said Britain should return to growth in the first three months of 2012 as the wider measure of industrial output grew in February thanks to increased energy production.
Nonetheless, the government predicts growth of just 0.8 percent this year, only a fraction more than in 2011.
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