James Sproule, chief economist at the Institute of Directors, says Yes.
The UK is set to enjoy the best growth in the G7 – not the most competitive economic growth league in the world, but still a contest worth winning. Yet despite this, policymakers remain concerned about the UK’s economic prospects.
It is certainly true that there is much to watch with a wary eye, including the Eurozone, the economic slowdown in Asia (notably in China and Japan), and geopolitical events in Ukraine and elsewhere.
And were these situations to deteriorate rapidly, it would be perfectly acceptable for policymakers to react.
But we seem to be acting as if disaster was a racing certainty, leaving interest rates so low that they cannot respond to an economic shock and monetary policy cannot work.
None of the gloom hanging over our economy is likely to dissipate soon, so firms across the country are simply getting on with business. It is time for policymakers to appreciate that this is the new normal, and act accordingly.
Alan Clarke, UK and Eurozone economist at Scotiabank, says No.
Interpretation is key when it comes to Mark Carney’s comments.
The governor is not saying that the Bank of England is thinking about loosening policy further. He’s saying that policy conditions are looser than average, and that this is appropriate given the economic backdrop.
The situation is analogous to a hospital patient who’s no longer on life support – they may still need some medication and rehabilitation before being able to stand on their own two feet.
Carney’s message is not even drastically at odds with those members of the Monetary Policy Committee voting for immediate rate hikes. They are merely advocating that the Bank should reduce the dosage of the drugs currently being administered.
It’s not being proposed that we should take the entire policy stimulus away. Rather, we should take the first steps on the journey towards weaning the economy off a reliance on exceptionally loose monetary policy.