Revisions to the growth of the UK economy make it more likely the Bank of England will launch another round of quantitative easing in the near term, says Howard Archer, the chief UK and European economist at IHS Global Insight.
Following changes to its GDP methodology, the Office for National Statistics today revised down its estimate for second quarter UK GDP growth from 0.2 per cent to 0.1 per cent, while it cut its estimate for first quarter growth from 0.5 per cent to just 0.4 per cent.
Following the revisions, Archer says the UK economy has now essentially been flat since the third quarter of last year.
Archer says: “The risk of a renewed recession has clearly risen recently and the economy is likely to find it hard to grow by much more than 1 per cent in 2012 after likely expansion of 0.9 per cent in 2011.”
As a result, Archer says it is now “touch and go” whether the Bank acts as soon as tomorrow’s Monetary Policy Committee announcement, or waits until November, when the MPC will have the Bank’s new GDP growth and inflation forecasts.
“Meanwhile, interest rates look set to stay at 0.50 per cent through to 2013,” adds Archer.
The last change to the BoE’s quantitative easing programme came on November 5, 2009, when the BoE increased its size by £25bn to £200bn.