Bank of England: Risk of double-dip 'can't be ruled out'

New fears: The Bank of England is cautious in its diagnosis of the UK economy
New fears: The Bank of England is cautious in its diagnosis of the UK economy

by Peter Wozniak

The UK economy is far from out of the woods and remains at risk of sliding back into recession over the next year, according to the Band of England's new policymaker Martin Weale.

In an interview with the Times on Tuesday, Mr Weale admitted that the central bank's growth forecasts may not be met, underlining the Bank's position that there is "a significant chance of the economy contracting over a four-quarter period".

He said: "I think it would be foolish to say there's no risk of that."

Mr Weale dismissed the prospect of inflation rising heavily due the Bank's reluctance to abandon a loose monetary policy as being a less likely eventuality than low growth.

"I am very comfortable with the view that there is slack in the economy, that unemployment is likely to rise further, and the way things are developing I find it hard to see that there are unusually substantial risks to inflation," he said.

In the environment of weak consumer confidence, heavy government spending cuts, and the continuing possibility of a sovereign debt crisis, Britain's emergence from the doldrums of the recession seems far from secure.

"The whole of the lesson of not only the recent crisis but earlier ones, is that you have periods of calm and then things bubble up again," Mr Weale concluded.

The comments saw the pound fall heavily against the dollar.


Politics @ Lunch

Friday lunchtime. Your Inbox. It's a date.