BoE’s Andrew Sentance warns of double dip risk
The Bank of England’s Monetary Policy Committee member, Andrew Sentance, has acknowledged that there is some risk of a double dip recession.
Mr Sentance said: “You have to recognise there is some risk of a double dip, but that’s not the central forecast.”
His comments come just a week after fellow policymaker, Kate Barker, said the UK is unlikely to return to recession.
Ms Barker, who is a former housing adviser to the Government, said it is possible, however, that the economy could contract for one quarter.
“It’s possible we will have a quarter when GDP falls, but I don’t think it will be a double dip. I would be surprised if we go back to recession but I think recovery will be bumpy and fragile,” she said.
The UK economy emerged from recession in the fourth quarter of 2009 by experiencing growth of just 0.3%.
A harsh winter and poor growth is likely to result in a sluggish recovery and many are concerned about the prospects for growth in the first quarter of 2010.
While all reports have suggested that the recovery will be fragile, some have expressed concern for a double-dip recession (whereby the economy goes into recession twice without having undergone a full recovery in between).
Mr Sentance’s comments resulted in a fall in sterling, which lost 2.4 cents against the dollar, to $1.503, while it also fell 1 cent against the euro to €1.100.
However, the pound has also been losing ground in the build-up to the general election, as well as growing concerns about the UK’s ballooning deficit.
Mr Sentance noted that a “substantial fiscal tightening” would be needed as the recovery gathered pace.