Dated: 10 November 2010
Commenting on the Bank of England’s quarterly inflation report, Graeme Leach, Chief Economist at the Institute of Directors, said:
“Uncertainty is written all over this report, and rightly so. There are so many competing forces towards sustained recovery or recession, the economic models are overwhelmed. This can be seen in the Bank’s statement that the odds of above or below target inflation are roughly equal.
“Conventional economic forecasting is a wasted exercise in a world of unconventional monetary policy and huge disagreement over the size and sign of fiscal multipliers in the wake of the financial crisis. This is a time for judgement and the IoD agrees with the Governor of the Bank of England that the Spending Review is unlikely to trigger a double-dip recession, quite the contrary, it is probably the most important step in sustaining recovery.
“Our deeper concern is that the problems in the banking system will continue to plague economic activity but that inflation uncertainty would delay the launch of QE2 in 2011. We will never know how the recession would have unwound if the original introduction of QE had been in 2008 and not 2009. Let’s hope we don’t make the same mistake twice.”
