May 13, 2009

BOE report is cautiously optimistic

The Bank of England joined the list of organizations with cautiously upbeat predictions for the British economy, but said recovery would still take some time.

The bank's quarterly Inflation Report said Britain's gross domestic product would fall at an annual rate of 4.5 percent in the second quarter, then grow to 2.5 percent by 2011, The Times of London reported Wednesday.

The economy will eventually heal, but the process may be slow, BOE Gov. Mervyn King cautioned.

Even if there is some recovery in output over the next six to nine months, we don't know how sustainable that will be given the weight of the balance sheet problems that have to be unraveled, he said.

The message here is that they are going to be in no hurry at all to start to tighten policy, whether that is through a reversal of quantitative easing or higher interest rates, said Jonathan Loynes, chief economist at Capital Economics.

It seems to me to inject a bit of caution amidst all the talk of green shoots of recovery, he said.

The Organization for Economic Cooperation and Development on Monday said Britain's leading indicators were up 0.3 points.