BoE fears low growth may be the new normal

Tim Wallace
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LOW GROWTH and high inflation could be a new trend for the UK economy, top Bank of England economist Ben Broadbent warned last night.

The Bank has consistently overestimated growth and underestimated inflation since the financial crisis, and Broadbent fears it could show they need to update their models to reflect a new environment.

“Large financial crises are rare events and none is exactly like any other,” Broadbent said.

“So I think it’s legitimate to view this as a structural break – a shift in things that, for a long period of time, we’ve been happy to treat as unchanging constants (e.g. trend growth) – and something we can understand only over time.”

But the Bank’s deputy governor Paul Tucker predicted healthier growth for the UK in the near future.

“We shouldn’t get too excited by one quarter but looking over the past year it’s perhaps not as bad as the headline figures suggest,” Tucker told a newspaper in Newcastle, where he was visiting local businesses.

“I think there’s a long way to go but there's certainly reason for hope.”