More on the double dip
“The immediate risk that they’ll be very aware of is a false dawn,” said Gieve, who left the central bank at the end of February.
“We’re likely to see quite a difficult and slow recovery,” Gieve said. “Recovery back to the sort of growth we’re used to may be quite slow. Banks will take some time.”
Gieve’s caution on the economy echoes the minutes of the central bank’s decision last month, where policy makers noted that “promising indications” from asset markets could signal “false dawns.”
“I am expecting a bit of a bounce in the output figures in the second half of this year, but does that mean that the recovery is well established?” Gieve said. “You’ve got quantitative easing, you’ve got very low interest rates. After all that, it should cause a bounce.”
The economy is also showing some signs of persisting weakness. Manufacturing production slumped in August to the lowest level since 1992, the statistics office said this week.
“The main risk, short term, is that everyone thinks the recovery is over, we tighten too quickly, and we see a sort of ‘W’ emerge,” Gieve said. “The manufacturing figures are a reminder that it’s too early to say it’s definitely over.”
And yet Osborne is still pushing the argument that cuts need to start now?