Economics IA Essay

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COMMENTARY COVERSHEET IB Economics commentary number:______2_____ Title of extract: _____ Bank of England Holds Rate at Already Low Level __________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ Source of extract:__ of access : October 4, 2013) _____________________________________________________________________________________________________________________________________________________…show more content…
“In the near term, we will get pretty strong growth,” said Jens Larsen, an economist at RBC Capital Markets. “Looking ahead, I don’t think we’ll have that very fast cyclical recovery that this would suggest. Wages, income in general and the level of indebtedness are still headwinds.” The bank said Thursday it would reinvest proceeds from £1.9 billion worth of maturing British government bond purchased under its asset-buying program in keeping the overall size of the economic stimulus at £375 billion. Mr. Carney, the former Canadian central bank governor who moved to the Bank of England in July, said in a speech last month that the outlook for British growth had “improved considerably in recent months” but that the prospects over the next three years were “solid, not stellar.” The pace of recovery is widely expected to slow at the beginning of next year. In July, Mr. Carney pledged to keep interest rates at a record low of 0.5 percent until unemployment fell to 7 percent; it currently is at 7.8 percent. The pledge, called forward guidance, is supposed to help fuel the economic recovery by creating certainty among borrowers about the affordability of debt in the near term. But Rob Wood, chief economist for Britain at Berenberg Bank in London, said in a note that he expected unemployment to reach 7 percent in the third quarter of 2015. “This is a faster decline than the BoE expects, so the first rate rise is probably coming sooner
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