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“The economy is expected to grow by 2% in 2011 but any base rate rise will be postponed into early Autumn. Growth will be a tough grind in 2011”
Since then, inflation has been well above target, commodity prices have been rising but the growth of the economy has been below trend. The preliminary estimate for growth in the first quarter of the year was 0.5% quarter on quarter and 1.8% year on year. This was just enough for Ed Balls to claim the economy is flat lining and and for George Osborne to hail growth of sorts. For the year as a whole, the economy is expected to grow by 1.7% according to consensus and our own forecast is revised down to 2.1% in this review. As for rates, the GDP figure will do little to convince the doves on the MPC to fly the Governors coop and vote for a rate rise. The earliest estimate is for a modest rate rise in the early Autumn. |
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Through last year, I was suggesting that growth would be above trend, inflation would remain stubbornly high and interest rates would have to rise to offset the inflation threat and mitigate the impact of import prices, particularly dollar denominated commodity prices.