FXstreet.com (Barcelona) - The resilience of the global and finantial matkets turmoil, together with the outlook of moderation of United Kingdom's output growth, the weakening of the consumption and the worsening international economic prospects have made the Bank of England's Committee forecast a slow down in output growth for the current year, to gradually drecover afterwards, the Bank affirms that the risks of growth are weighted to the downside.
Consumer inflation has moderated to levels close to 2.0% year on year in December, although energy and food prices are likely to push in higher in the upcoming months, while pay growth has remained practically unchanged in the year. GDP growth has moderated to 0.6% in the Q4, while the Bank' regional Agents have advanced further moderate deceleration for the months ahead. The Challenge for the Bank's policy thus, remains now in the combination of slow economic growth with above target inflation.
The international context does not seem much brighter, according to the Bank's report, with US GDP falling considerably over the last quarter of 2007, the work market weakening ad a long-lasting housing slump which has prompted the Ferderal reserve to cut interest rates considerably. In the EU, output growth is also starting to soften, while Asian and emerging markets continued expanding robustly.
The Bank affirms that the bank rate falls in line with market yields, the bank expects a sharp increase of inflation in the near term to moderate afterwards, while the Committee counter balances downside risks like the potential for a greater tightening in credit conditions, and the associated impact on demand, at home and abroad with upside risks such as the possibility that the short-term rise in inflation leading to a more persistent rise in medium-term inflation expectations.