The Bank of England’s Chief economist Spencer Dale has said in an interview with the Independent that although the Budget has helped to avert the risk of a major debt crisis to the country, the austerity measures will lead to low growth in the future. He noted that with the UK facing higher inflation, lower growth and rising unemployment that things will not get better for an “awfully long time”.
He expects the economy will remain “incredibly anemic” when compared with previous recoveries for the next five years. He believes Osborne’s VAT hike in the Budget will keep inflation higher for longer and that inflation would not reach the Monetary Policy Committee’s target of 2 per cent before the end of 2011.
He said: “The near-term outlook for both growth and inflation has deteriorated over the past couple of months.
“Inflation has come out a little higher than expected and the news on VAT in the June Budget means that the time it will take inflation to get back to target will be pushed out, and I expect it will be above target until the end of next year.”
“We know the evils of inflation” Dale said. “We have to be incredibly vigilant”.