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Wednesday, November 11, 2009

BofE's Mervyn King: Worst Over, "Long hard haul" Ahead

by Calculated Risk on 11/11/2009 07:25:00 PM

From The Times: The worst is over, says Bank of England Governor

Better-than-expected unemployment figures and a rosier growth forecast from the Bank of England raised hopes yesterday that Britain was beginning to claw its way towards economic recovery.
Mervyn King, Governor of the Bank, said Britain had “only just started along the road to recovery” and that it would be “a long hard haul” back to regain the level of activity of two years ago before the financial crisis hit.
The following graphs are from the BofE November 2009 Inflation Report. The first graph shows the projections for GDP.

BofE GDP Click on graph for larger image in new window.

Note that GDP isn't expect to return to pre-recession levels until sometime in 2011 (mean estimate).

Note from BofE: To the left of the first vertical dashed line, the distribution reflects the likelihood of revisions to the data over the past; to the right, it reflects uncertainty over the evolution of GDP growth in the future. The second dashed line is drawn at the two-year point of the projection.

The second graph shows the projections for inflation.

BofE Inflation The BofE expects a short-term increase in inflation because of higher oil prices, but then below trend inflation through most of 2011.

Note that the line is drawn at the 2% target inflation rate (not zero).

From the BofE: Price stability is defined by the Government’s inflation target of 2%.