Home Money Bank of England is crushing economy, says former chief economist Andy Haldane

Bank of England is crushing economy, says former chief economist Andy Haldane

by Elijah
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Concern: Former Bank of England chief economist Andy Haldane (pictured) said keeping rates too high for too long could prolong the recession.

The Bank of England risks “crushing” the economy if it fails to cut interest rates quickly enough, its former chief economist has warned.

Andy Haldane said keeping rates too high for too long could prolong the recession and damage the central bank’s credibility in the process.

His comments came after official figures last week showed Britain ended last year in recession. The latest data suggests the economy has started 2024 in better shape.

But that could be at risk if the Bank of England keeps rates high for too long, Haldane suggested.

That would compound their mistake in not raising rates earlier, when inflation was rising, he said.

Concern: Former Bank of England chief economist Andy Haldane (pictured) said keeping rates too high for too long could prolong the recession.

“It’s one thing to have missed inflation on the way up, which happened, and quite another to have crushed the economy on the way down,” Haldane told Bloomberg.

“That double blow to credibility is one that, if I were a central banker, in my old job, I would seek to avoid.”

The latest GDP figures show the economy contracted 0.3 percent in the final quarter of last year, following a 0.1 percent contraction in the third quarter. Two straight quarters of negative growth mean an economy is in recession.

In 2021, as he prepared to leave the Bank, Haldane was among those calling for rates to be raised to tackle rising inflation, a call that was not heeded until later that year.

Now he fears he is too slow to move in the other direction.

Asked whether the Bank could make the recession worse unless it changes course soon, he said: “I think that’s where the balance of risks lies, yes.”

“To me, the case for putting in place some early, early insurance on the monetary policy side is strong and getting stronger, and I fear we leave that insurance too late in the year.”

Hopes that the recession could end soon were boosted last week by better-than-expected figures showing retail sales rebounded after a dismal December with a 3.4 percent rise in January.

That could help Britain emerge from a recession just as Germany faces a recession.

Yesterday, the Bundesbank predicted that German GDP could fall again in the first quarter, after a contraction in the fourth quarter. And he added: “There is still no recovery for the German economy.”

The Bank of England’s forecast for the UK is slightly less gloomy. Britain’s GDP is thought to reach 0.1 percent growth early this year.

Hopes have risen that interest rates – which were raised to 5.25 percent – ​​will begin to fall now that inflation has fallen back to 4 percent. That should drive growth.

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