Grim outlook from Bank of England: rates static till 2013
In a relentlessly bleak outlook for Britain’s prospects, the Bank downgraded its growth forecasts for the next three years, cut its longer-term inflation projections, and warned that the risks remain “on the downside”.
It will not be until 2014 that the economy is expanding faster than its trend rate, five years after the end of the recession. After the slumps in both the 1980s and 1990s, growth bounced back above trend within two years.
Inflation will peak at 5pc in the next few months before falling back at the end of the year and dropping below the 2pc target in 2013 if rates rise in line with market forecasts, the Bank’s Inflation Report showed.
Its assumptions had markets pricing a first rate increase in the final three months of 2012, but the report suggested the Bank could follow the US Federal Reserve and leave rates on hold for longer.
“Echoing the message from the US Fed, the projections implied that the Monetary Policy Committee does not envisage raising the policy rate for a long time, probably not until 2013,” Simon Hayes, UK economist at Barclays Capital, said.
Source: Grim outlook from Bank of England: rates static till 2013 - Telegraph
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So, just to sum it up - rate will be at near 0 for around 4-5 years, where as real inflation will be around 10%+.
Sir Merv must know what he is doing
In a relentlessly bleak outlook for Britain’s prospects, the Bank downgraded its growth forecasts for the next three years, cut its longer-term inflation projections, and warned that the risks remain “on the downside”.
It will not be until 2014 that the economy is expanding faster than its trend rate, five years after the end of the recession. After the slumps in both the 1980s and 1990s, growth bounced back above trend within two years.
Inflation will peak at 5pc in the next few months before falling back at the end of the year and dropping below the 2pc target in 2013 if rates rise in line with market forecasts, the Bank’s Inflation Report showed.
Its assumptions had markets pricing a first rate increase in the final three months of 2012, but the report suggested the Bank could follow the US Federal Reserve and leave rates on hold for longer.
“Echoing the message from the US Fed, the projections implied that the Monetary Policy Committee does not envisage raising the policy rate for a long time, probably not until 2013,” Simon Hayes, UK economist at Barclays Capital, said.
Source: Grim outlook from Bank of England: rates static till 2013 - Telegraph
----------
So, just to sum it up - rate will be at near 0 for around 4-5 years, where as real inflation will be around 10%+.
Sir Merv must know what he is doing
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