A 'bumpy ride' ahead for UK economy
28 Nov 07

Two things will contribute to what Andrew Sentance, a member of the Bank of England's MPC calls a 'bumpy ride' for the UK economy - the global financial turmoil and higher oil prices.

These two factors are "operating in opposing directions in terms of their impact on inflation".

The UK economy is predicted to slow down sharply next year - Alan Castle of Lehman Brothers predicts growth to slow down to 1.7% next year and that the BoE will cut rates three times by March.

Andrew Sentance dismissed the argument that the rise in oil prices was no longer that important to Britain. I had previously written in a previous blog about how UK businesses will not be significantly affected by higher oil prices because they have been able to price in rising oil prices into their business plans. This is because the recent rise in oil prices has been more gradual over the last few years as opposed to the sudden shock seen in the 1970s.

Links:
Warning given of 'bumpy ride' for economy - The FT (28 Nov 07)