MPC takes the shock and awe approach - EY ITEM Club comments

4 August 2016

  • Share
  • New forecast shows MPC prioritizing growth over inflation
  • There could be more to come from both monetary and also fiscal policy

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“Individually the three elements of the MPC’s plan may have a relatively modest impact, but combined they represent a loosening of policy which is towards the top end of the range that anyone could have realistically anticipated.

“Previously the MPC had talked about the policy dilemma raised by the prospect of higher inflation and lower growth. Today’s forecasts show that the Committee has clearly prioritised supporting growth, with looser policy coming despite the MPC anticipating that inflation will be some way above target through the second half of its forecast.

“There is also a clear commitment to loosen policy further, even if the outlook evolves in line with the MPC’s new forecast. With the Chancellor also being “prepared to take any necessary steps to support the economy and promote confidence” we look set to see a substantial loosening of policy over the second half of the year which should act as a powerful defence against a Brexit-induced slowdown.”