BEIJING (MNI) – U.K. inflation is set to fall sharply next year,
though more consumption will be needed to push corporate investment,
Bank of England deputy governor Charlie Bean said in comments published
Friday.
Bean, a member of the bank’s Monetary Policy Committee, told the
Manchester Evening News that it is “difficult to time” how long interest
rates will be kept at record lows, but said the increase in V.A.T. and
rising global commodities prices will have less of an impact in 2012.
He said he supported Bank of England Governor Mervyn King’s
forecast of “sharp falls in the inflation rate” in the coming year, but
also warned that weak consumption is holding back investment activity.
“As far as investment goes, businesses are not likely to invest
unless they feel the demand is there. So, we probably do need some
slightly stronger consumption to help generate the extra demand to get
investment going,” he said, backing calls for the U.K. government to
bring forward capital investment programs.
“The general picture that emerges is one of relatively weak growth
and growth that has slowed in the last few months,” he said, noting the
impact of Europe’s debt crisis.
But businesses are in relatively good financial shape, Bean said,
helping to keep unemployment lower than it would otherwise have been.
Stimulating the U.K. economy is a “chicken and egg” situation, he
said, in which businesses need customers to spend to bring confidence
back to the boardroom.
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