27/02/2024
The governor of the Bank of England has stated that Britain is beginning to emerge from its mild recession and will benefit when interest rates begin to decline later this year.
Rejecting claims that Threadneedle Street was "behind the curve" for refusing to reduce borrowing costs in spite of declining inflation, Andrew Bailey clarified that rate cuts were on the horizon.
“We don’t need inflation to come back to target before we cut interest rates,” Bailey said as he came under pressure from Conservative members of the Treasury committee to respond to news that the UK fell into recession in the second half of 2023.
“The economy seems to be at full employment and that’s a very good story,” the governor said. In comparison to previous downturns, the UK was suffering from a “very small recession” and was now showing “distinct signs of recovery”, he added.
The GDP decreased by just 0.5% over the two quarters of negative growth in the previous year.
"This is by far the weakest recession when compared to those since the 1970s," Bailey stated. He said that during prior recessions, the economy shrank by 2.5% to 22% over a two-quarter period.
Presently, the annual inflation rate is 4%, but Bailey predicted that it will return to its target of 2% in the coming months, then increase to 2.75% by the end of 2024.
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