Britain's economy is not yet out of the woods and a sustained period of "robust" growth is needed to put it back on track, a senior Bank of England policymaker warned last night.
Spencer Dale, the Bank's chief economist and a member of its Monetary Policy Committee, said the recovery must be judged "in terms of the level of output, not the rate at which it is growing". "One year of growth does not make a recovery," he warned in a speech at Kent Business School at the University of Kent in Canterbury. "We need to see a sustained period of robust growth for the economy to function normally again."
On the upside, he said the weakness of the pound did appear to have supported the export of goods, which are increasing strongly. "Perhaps more tellingly, the increased competitiveness of our goods exports has succeeded in arresting the persistent decline in our share of world export markets seen over the past 15 years or so," he said. However, falling exports of services possibly reflected reduced demand, he added. Mr Dale said it was "simply not true" that the MPC, which has kept interest rates at close to zero and pumped billions into the economy, had gone soft on inflation.
"It seems clear to me that there is some degree of spare capacity and that this is likely to damp inflationary pressures," he said, while acknowledging that "there are clearly significant risks to this strategy of looking through the temporary impact of price level shocks on inflation".