The spare 0.3% capacity of GDP leaves little room for manoeuvre.
Although productivity in the UK is rising without business investment, inflation is likely to end 2016 higher than this current rate, plus, the gap in GDP growth has narrowed when compared to the rest of the Eurozone, which has been reflected in the value of currency since the last Report. What will the results of this, the Policy Committee’s unanimous decision to keep rates low and the Governor announcing ‘no hurry to follow America’s lead and raise interest rates’ be?
With price pressure likely to continue not only from China and Japan (by making goods cheaper to sell in Europe and USA) but also from the markets which lenders ‘buy’ their money from (i.e. fixed mortgage deals fluctuate, and savers aren’t happy bunnies) falling prices aren’t all good news for the economy.
Even in these times of static interest rates….breathe in! Predicting is probable’s twin when the outside influences, placing the pressure, are always moving.
Image and Article credit: Copyright SUF © 2016