In U.K. recent economic indicators have shown the uncertainty increased for households and companies, especially in the past 5 years. Caused by both internal and external factors, the confidence in the monetary policy of the Central Bank of England is getting increasingly less followers. It’s about a long term process that has been going on not only in U.K. but worldwide. The economy is empowered by average consumers and if they don’t trust anymore the way that their economy is being run, then the process of getting back to economic recovery is considerable slowed. Central Banks all over the world may want to implement important changes in the actual system but we cannot expect things to get better overnight. Consequently, we should not rush to interpret the present results but rather figure out the long term effects.
Another indicator that is being closely watched is the inflation which in U.K. proved to be a problem. Excepting a short episode at the end of 2009, for the past 4 years and a half inflation stayed above the safety threshold of 2%. In these conditions, I find it difficult for the BOE to meet its promise to reduce inflation over the next 2 years.
Moreover, the World Bank cut its forecast about the global economy from 2.4% growth to 2.2% for the year end. The main problematic areas are Europe, India and China.