In its Inflation Report released today, the Bank of England (BoE) states that "The outlook for UK growth remains unusually uncertain".
Below are some of the key points from the report:
"The greatest threat to the recovery stems from the risk that an effective policy response is not implemented sufficiently promptly in the euro area to ensure that the adjustments in the level of debt and competitiveness required by some member countries occur in an orderly manner. Even if an effective set of policies is implemented, the scale of the necessary adjustments points to a sustained period of sluggish euro-area growth and heightened uncertainty".
BoE explains further,
"As in past Reports, the MPC sees no meaningful way to quantify the size and likelihood of the most extreme possibilities associated with developments in the euro area, and they are therefore excluded from the fan charts. But the threat of these more extreme outcomes is likely to continue to weigh on UK economic activity over the forecast period, for example through its effect on asset prices and confidence".
And finally,
"There remains a range of views among Committee members about the
outlook for GDP growth. On the above assumptions, the Committee’s best
collective judgement is that the economy will gradually recover, but that GDP
growth in the second half of the forecast period is more likely to be below than
above its historical average rate. That outlook is weaker than in the May Report reflecting the possibility that the factors contributing to the
weakness of growth since the financial crisis may persist. The difficulty of
knowing for how long these factors will continue has caused the Committee to widen
the GDP fan chart".
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