LONDON
Bank of England (BoE) Governor Andrew Bailey on Monday cautioned that the UK economy remains sluggish, despite slightly better-than-expected growth figures reported last week.
Speaking during a visit to South Wales, Bailey acknowledged that the latest GDP data showed a modest expansion but stressed that the broader economic picture remains unchanged.
“We’ve had the GDP numbers slightly stronger than we thought it would be, but I don’t think it changes the general story we have got, which is the economy has been quite static since late spring last year,” Bailey said.
Official figures confirmed that the UK economy grew by 0.1% in the final quarter of 2023, avoiding the 0.1% contraction predicted by the Bank.
However, Bailey warned that underlying challenges persist, particularly concerning inflation and the balance between supply and demand in the economy.
“The big question for us was to what extent is it demand and to what extent it is supply and demand, and that will go on being a big question for some time,” he explained.
Bailey noted that if weak demand were the primary issue, inflation would likely decline more rapidly.
However, if supply-side constraints were more dominant, inflationary pressures could persist, he added.
“Clearly it matters, as the more you think it is pure demand, then that is going to bring inflation down faster. The more you think it is pure supply, it will have the other effect, but actually a combination of the two is probably the reality,” he said.
