In a report published today, Bank of England’s Chief Economist Spencer Dale claimed that the economy is on the recovery path and the reports of weakness in the broad money growth can be misleading.
In the foreword of the current issue of the central bank’s latest bulletin, which is a collection of research articles, Dale commented that “the recovery in the United Kingdom looks set to continue”.
However, domestic and international will determine the durability and strength of the country’s recovery, he added.
The country’s spiraling inflation has been a cause for worry and Dale had joined fellow members Andrew Sentance and Martin Weale of the bank’s Monetary Policy Committee (MPC) for a rate hike last month. However, the remaining six members voted against the move and favoured continuing with the current rate of 0.5%.
Dale said the correlation between growth in UK GDP and growth in broad money has changed because of the financial crisis and it is possible for the economy to grow faster although the broad money growth remains weak.
The central bank’s data showed earlier this month that the broad money supply M4 has shrunk fastest since record keeping began in 1983.
The economy had contracted unexpectedly in the last quarter of 2010. However, most economists attribute it to severe winter conditions and are confident of a bounce back in the first quarter of 2011.