BoE powerless in UK productivity crisis

Tim Wallace in the Daily Telegraph reports Mark Carney, Governor of the BoE – Bank of England – saying: “Britain’s economy has a new, lower speed limit”

Growth can only get to even modest levels before inflation takes off whereupon ‘we must ease our foot off the accelerator’

Ben Broadbent, one of Carney’s deputies, claims: “Productivity growth has slowed in just about every advanced economy, but it has been more severe in this country than in others”

Apparently, poor investment and poor productivity growth is ‘ the biggest part of the story’ – oh, and Brexit has had an impact too

As we all know, the BoE has few clubs in its bag – bank rate manipulation is one used to drive the economy further and get it out of trouble

For the past decade, extremely low interest rates have been used to prop up demand – it keeps mortgage bills down, encourages savers to spend rather than earn measly returns – and, theoretically, businesses can fund investments more cheaply

But it has failed with business investment

Carney says we had much spare capacity in the past so lack of investment didn’t have much impact on the ‘speed limit’ of the economy

But now, labour supply and capacity is near its limit – production capacity also – so productive investment is certainly needed

One’s left hoping for the best and keeping one’s fingers crossed

After all, what are central bankers paid for?

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