Best of the Week
Most Popular
1.BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - Nadeem_Walayat
7.Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - Michael_Noonan
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.Gold And Silver: Security, And BREXIT - Michael_Noonan
10.BrExit Vote - "The Trend is Set" -- And What You Should Pay Attention to Next - EWI
Free Silver
Last 7 days
George Osborne's BrExit Excuse to Scrap UK Government Debt, Deficit and Borrowing Targets - 2nd July 16
Breakouts Galore in Gold and Silver - 2nd July 16
Forecasts, Commentary & Analysis on the Economy and Precious Metals - 1st July 16
Italian Banks & Moving The Risk During Crisis - 1st July 16
Gold's Final Warning of Impending Monetary Collapse - 1st July 16
China Can and Will Confiscate Gold When it Suits Them! - 1st July 16
Carney Sparks More RISK ON Market Trades - 1st July 16
Gold, Silver Reaction Following Brexit, Central Bank Desperation Never More Evident… - 1st July 16
Stock Market Rally is Wearning Thin - 1st July 16
UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - 1st July 16
Michael 'Little Finger' Gove Slays Boris 'Baratheon' Johnson in Game of Thrones for Next Tory PM - 30th June 16
Gold, Silver, Bonds and Stocks Path Towards Inflation - 30th June 16
Stock Market SPX Rally Nearing its End as DB Gets Slammed - 30th June 16
Brexit & The Precipice - 30th June 16
Gold and Silver Precious Metals Bull Market Update - 30th June 16
14 Signs the World Is on the Verge of Generational Chaos - 30th June 16
BrExit Stock Market Upwards Crash as FTSE Recovers 100% of Friday Plunge - 30th June 16
Stock Market Rally Runs Out of Steam - 29th June 16
Rapid Growth:The Financial Trends Of Online Gaming - 29th June 16
FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - 29th June 16
Stock Market Bounce May be Over - 28th June 16
Stock Market Meltdown Likely to Drive Gold Towards $1,500 - 28th June 16
Brexit Victory over the EU Globalists - 28th June 16
Brexit Psyop: Greenspan Falsely Blames the Brits for the Crash and Chaos to Follow - 28th June 16
Greenspan Calls Brexit a ‘Terrible Outcome’ as Euro Area Tested - 27th June 16
Stock Market SPX Below Mid-Cycle Support - 27th June 16
Best Holidays for Summer 2016 - 27th June 16
Another Stocks Bear Market? - 27th June 16
BBC EU Referendum Result Highlights - YouGov, Markets, Bookmakers, Pollsters ALL WRONG! - 26th June 16
Investors Map Post-Brexit Strategies Amid Global Market Upheaval - 26th June 16
Gold Price Weekly COT Update - 26th June 16
First the UK, then Scotland ... then Texas? - 26th June 16
Stocks Bear Market Resumes or Just More Noise - 26th June 16
Gold And Silver: Security, And BREXIT - 25th June 16
Dow, Euro & Brexit Recap - 25th June 16
Resistance Holding Gold Stocks after Brexit - 25th June 16
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Market Volaility

Bank of England Forecasts Deep Recession

Economics / Recession 2008 - 2010 Nov 12, 2008 - 09:41 PM GMT

By: Victoria_Marklew

Economics Best Financial Markets Analysis ArticleThe Bank of England's Quarterly Inflation Report was released this morning and its outlook for the UK economy was every bit as dismal as feared. The Bank's central projections for GDP growth and inflation are "substantially weaker" than in the August Report, although today's Report also acknowledges that the prospects for both are "unusually uncertain." The central projection is for a pronounced contraction in domestic demand that causes output to fall markedly through the first half of 2009, with the contraction in real GDP reaching around 2.0% on the year by Q2.


Assuming a combination of lower interest rates, a gradual expansion in credit, lower global commodity prices, a weaker currency, and continued fiscal stimulus, a gradual recovery should get underway in the second half of next year, with real GDP growth nudging back into positive territory by Q1 2010.

The annual rate of inflation is projected to fall sharply in the near term, down from 5.2% in September to around 2.0% by Q2 next year, and then "well below the 2.0% target" by mid-2010. The Report also noted that most measures of inflation expectations have fallen back in recent months. This year's previous Reports had highlighted the possibility of rising inflation expectations as a key risk to the inflation outlook.

All told, the BoE's projections are its most pessimistic in over a decade and are significantly worse than just three months ago. Back in August, the BoE's central projection saw the economy bottoming out in Q2 2009 with real GDP growth around zero y-o-y, and inflation not falling below the target rate until early 2011.

In his subsequent press conference, BoE Governor Mervyn King noted that there will be "much to learn between now and our next meeting" but also stated that "we are certainly prepared to cut the Bank rate again, if that proves to be necessary."

This morning also brought the release of September employment data. The number of unemployed (EU-harmonized ILO measure) jumped to 1.825 million in the three months to September, the highest level since October-December 1997, pushing the unemployment rate up to 5.8%, the highest rate since January-March 2000. The number of people claiming unemployment benefit ("claimant count unemployment") jumped by 36,500 in October, the sharpest increase since December 1992.

The minutes of last week's Monetary Policy Committee meeting will be published November 19, and will give an indication of just how worried the members are about the outlook. However, the tone of today's Inflation Report, the magnitude of the downward forecast revisions, and the Bank's acknowledgement that it is no longer so concerned about higher inflation expectations, together point to another marked cut in interest rates at the December 4 policy meeting - 50bps is a given, up to 100bps is possible - and probably more easing in early 2009.

By Victoria Marklew
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Victoria Marklew is Vice President and International Economist at The Northern Trust Company, Chicago. She joined the Bank in 1991, and works in the Economic Research Department, where she assesses country lending and investment risk, focusing in particular on Asia. Ms. Marklew has a B.A. degree from the University of London, an M.Sc. from the London School of Economics, and a Ph.D. in Political Economy from the University of Pennsylvania. She is the author of Cash, Crisis, and Corporate Governance: The Role of National Financial Systems in Industrial Restructuring (University of Michigan Press, 1995).

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

Victoria Marklew Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife