Wednesday, May 14, 2008
Bank maps out a bumpy road
Posted by David Smith at 12:30 PM
Category: Thoughts and responses

After the shocking inflation numbers of the past couple of days, few could have expected a reassuring inflation report from the Bank of England. Sure enough the picture it pains is a very gloomy one. The Bank is caught between external inflationary pressures and a rapidly cooling domestic economy. The inflation report does not rule out further rate cuts but it suggests they will be very modest.

The Bank should not stand in the way of the necessary rebalancing of the economy, the Governor said, and the risks to even its weak growth forecast (implying a slowdown to 1% a year by the end of the year) are to the downside. It still expects a recovery next year as the credit crisis eases and the effects of sterling's decline kick in. But all in all, a pretty grim picture. More details here.