The economy is still robust and will grow 7.25% despite the pingdemic, says the Bank of England
- The bank said growth will slow to 3 per cent in the third quarter
- Even so, the economy will reach its pre-pandemic level by the end of the year
- But inflation will climb to 4 per cent – double the Bank’s target
The economy will still grow by 7.25 per cent this year, despite the pingdemic
The economy will still grow by 7.25 per cent this year, the Bank of England has predicted – despite a slowdown caused by the ‘pingdemic’ and growing fears around the Delta variant.
Output climbed by a better-than-expected 5 per cent in the second quarter of the year, but growth will slow to 3 per cent in the third quarter, the central bank said.
Even so, the economy will reach its pre-pandemic level by the end of the year. But inflation will climb to 4 per cent later this year – double the Bank’s target – as supply chain bottlenecks and staff shortages cause chaos.
Despite Threadneedle Street’s admission that the cost of living is set to soar, officials on the Bank’s Monetary Policy Committee (MPC) voted to keep interest rates steady at 0.1 per cent yesterday.
But there were some murmurings of dissent over the Bank’s £875 billion money-printing programme, as one official, Michael Saunders, voted to reduce its size to £830 billion. The Bank re-started the programme, known as quantitative easing (QE), during the pandemic to inject more cash into the economy, and dropped interest rates to rock-bottom.
As activity has begun to pick up, some experts are worried that the economy could overheat and inflation will soar if the full £875 billion QE programme goes ahead. However, the Bank thinks unemployment will not climb any further from 4.8 per cent – even when the furlough scheme, which is still paying the wages of around 1m staff, ends in September.
Governor Andrew Bailey said: ‘This points to the success of economic policy measures in avoiding a marked rise in unemployment, in the face of such a large downturn in economic activity.’