Bloomberg sees Bank's slowdown much as expected

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Bloomberg sees Bank's slowdown much as expected

17/07/2008 21:35

LONDON (Reuters) - The slowdown in the British economy has so far not been much greater than that envisaged by the Bank of England in May, central bank policymaker Andrew Sentance was quoted as saying by a news agency on Thursday.

"It’s not clear that the slowdown in the economy that has emerged so far is significantly sharper than we were projecting in the May inflation report," Sentance was quoted as saying by Bloomberg News.

"We may have to accept that the economy slows further, that we’ve got a few more difficult quarters in the real economy to get inflation back to the central bank’s 2 percent target."

Sentance is known as one of the most hawkish members of the Monetary Policy Committee.

"I have been particularly struck by the speed with which inflation has moved to somewhere that is significantly above target," Sentance told the news agency.

"There are clear risks to inflation expectations in this environment," he added.

Earlier in the week, Sentance noted that inflation expectations had moved up sharply and this had increased the risk that sharp price rises became embedded.

"The MPC’s chief hawk is doing what hawks do. This follows some relatively dovish voices of late and highlights that it is too soon to rule out a rate hike in the UK," said Alan Clarke, UK economist at BNP Paribas.

"We continue to believe it is a risk -- up to around 40 percent chance by November -- though ultimately will not be delivered, rather the next move is likely to be a cut during Q1."

The Bank held interest rates steady at 5 percent last week and most economists expect borrowing costs to remain steady for many months ahead as while growth is slowing sharply, inflation hit a series-high of 3.8 percent in June, almost double the central bank’s target.

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