Is Anyone Really Controlling The UK Economy?

The UK economy is performing weaker than expected, which has forced the Bank of England to put a hold on plans to increase interest rates.

The bank’s influential rate-setting monetary policy committee sat on their hands and adopted a wait-and-see what happens approach after digesting the most up-to-date economic data.

But their stance leaves unanswered questions.

Taking no action is always an option when faced with a difficult choice of what to do – but is the economy under control or running away from the experts charged with taking the reins?

And is the economy carrying on regardless, leaving them impotent?

Economic fears

The fear is both they may not know what they are doing and whatever they do has no impact anyway.

So, they decided to leave the rate at 0.5% for another month.

Seven of the nine-member committee sided with governor Mark Carney, who argues a rate rise must come before the end of the year if the economy shows some robust signs of bouncing back at more than the disappointing growth of 0.1% in the first quarter.

Despite good news on low unemployment and rising wages, the underlying concern is a slow-down is not far away as the economy is growing at the lowest rate for five years.

Cold weather

At the start of the year, the bank predicted growth of 0.4% in the first quarter and 1.8% for the year.

That forecast has already been cut to 1.4% and may drop even more as inflation is falling faster than expected.

Analysts are making excuses – the cold weather may have influenced the figures that may be adjusted upwards. The truth is forecasts are just that – an educated guess that may not turn out to be correct and life always throws up the unexpected to distort the best researched plans.

“Given the recent weakness in consumer credit and the housing market, there was somewhat greater than usual uncertainty about the near-term momentum in consumer spending and the extent to which households would adjust their spending and saving to the past fall in their real incomes,” the committee said.