The economy is still robust and will grow by 7.25% despite the pingdemic, says Bank of England
- Bank said growth will slow to 3 percent in the third quarter
- Still, the economy will reach pre-pandemic levels by the end of the year
- But inflation will rise to 4 percent – double the Bank’s target
The economy is still growing by 7.25 percent this year, despite the pingdemic
The economy will grow by 7.25 percent this year, the Bank of England predicted – despite a slowdown caused by the ‘pingdemic’ and growing fears about the Delta variant.
Production rose a better-than-expected 5 percent in the second quarter of the year, but growth is set to slow to 3 percent in the third quarter, the central bank said.
Still, the economy will reach pre-pandemic levels by the end of the year. But inflation is set to climb to 4 percent later this year — double the Bank’s target — as supply chain bottlenecks and staff shortages wreak havoc.
Despite Threadneedle Street’s admission that the cost of living will rise, officials of the Bank’s Monetary Policy Committee (MPC) voted yesterday to keep interest rates stable at 0.1 percent.
But there was some disagreement over the Bank’s £875bn money printing program when an official, Michael Saunders, voted to reduce its size to £830bn. The Bank restarted its program, known as quantitative easing (QE), during the pandemic to inject more money into the economy, and drove interest rates to rock bottom.
With activity starting to pick up, some experts worry that the economy could overheat and inflation will rise if the full £875bn QE program goes ahead. However, the Bank thinks unemployment won’t rise beyond 4.8 percent — even if the furlough scheme, which still pays the wages of about 1 million employees, ends in September.
Governor Andrew Bailey said: “This points to the success of economic policy measures in preventing a marked rise in unemployment in the face of such a major slowdown in economic activity.”