Bank of England Warns UK Economy Remains ‘Quite Static’ Despite Growth Figures
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Loading... - Dalila Kettani
- 18 Feb 2025
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Bank of England (BoE) Governor Andrew Bailey issued a cautionary note regarding the UK economy on Monday, emphasizing that it remains sluggish despite recently reported growth figures that exceeded expectations. During a visit to South Wales, Bailey acknowledged the modest expansion indicated by the latest GDP data but maintained that the overall economic landscape has not changed significantly.
“We’ve had the GDP numbers slightly stronger than we thought it would be, but I don’t think it changes the general story we have got, which is the economy has been quite static since late spring last year,” Bailey stated. Official figures confirmed that the UK economy grew by 0.1% in the final quarter of 2023, narrowly avoiding the 0.1% contraction that the Bank had predicted.
Persistent Challenges Ahead
Despite the slight uptick in growth, Bailey highlighted that underlying challenges continue to loom, particularly in relation to inflation and the balance between supply and demand within the economy. “The big question for us was to what extent is it demand and to what extent it is supply and demand, and that will go on being a big question for some time,” he explained.
Bailey elaborated on the implications of demand versus supply-side constraints, noting that if weak demand were the primary issue, inflation would likely decrease more rapidly. Conversely, if supply-side constraints were more significant, inflationary pressures could persist longer than anticipated.
“Clearly it matters, as the more you think it is pure demand, then that is going to bring inflation down faster. The more you think it is pure supply, it will have the other effect, but actually a combination of the two is probably the reality,” he said.
Bailey's remarks underscore the complexity of the current economic situation in the UK. While the recent GDP figures provide a glimmer of hope, the Bank of England remains vigilant about the persistent challenges that could hinder sustained growth. As the economy navigates these uncertainties, the interplay between demand and supply will be crucial in shaping future inflation trends and overall economic performance. The BoE's cautious stance reflects a broader understanding that while growth is welcome, it does not signal a robust recovery just yet.
