Tony Dolphin
High inflation puts on Plan B on hold – is there a Plan C?
George Osborne has announced the biggest tightening of fiscal policy over a four-year period since World War II, to be achieved mainly through cuts in public spending. He believes that it will lead to lower long-term interest rates and, by increasing certainty about future levels of taxes, boost consumer and business confidence.
Bank of England forecasts lower growth and high inflation
In his opening remarks at the press conference to launch the report, Mervyn King, the Bank’s Governor, highlighted how these uncertainties mean that inflation could turn out higher than forecast (for example if commodity prices continue to increase at a rapid pace or if inflation expectations rise) or lower than forecast (if wage increases remain low and import price inflation fades).
Ireland left with nowhere to go, damned if it does, damned if it doesn’t
If Ireland tightens fiscal policy to reduce the deficit, output growth will be even weaker in the short-term, pushing the deficit back up again. And if it cuts taxes or increases spending to boost economic activity, the deficit will also increase. It is damned if it acts, and damned if it doesn’t. Unfortunately, the only way out may be recourse to the IMF.
Economic update – November 2010
The UK economy grew by 0.8 per cent in the third quarter of 2010, twice as fast as expected by City economists. As in the second quarter, growth was boosted by a large increase in the output of the construction sector, but manufacturing output also increased strongly and there were solid increases in output across the service sector. Growth in the last three quarters has averaged an annual rate of 3.2 per cent.
More evidence housing market has lost its momentum
Figures released today by the Bank of England suggest households’ demand for borrowing remained weak in September. Net lending secured on dwellings (i.e. mortgage borrowing) increased by only £0.1 billion in the month and was just 0.8 per cent higher than in September 2009.
Economic growth beats expectations
The UK economy grew far more rapidly than expected in the third quarter. Real GDP (the total output of the economy) increased by 0.8 per cent and was 2.9 per cent higher than in the third quarter of 2009, according to figures released today by the Office for National Statistics. Economists had expected an increase of just 0.4 per cent.