UK economists say BOE outlook for deep recession is misleading

Bloomberg: Some of Britain’s top economists warned that the Bank of England risks making a bad situation worse by publishing forecasts for a recession based on a path for interest rates that it has no intention of following.

On Thursday, the BOE said the UK faced the longest recession on record — a 2.9% contraction that would be as deep as what the UK suffered in the 1990s. That assumed the BOE’s key rate reaches 5.25% and remained above 4% into 2025. At the same time, it disowned those projections and suggested a shorter, shallower downturn was more likely.

The BOE rarely warns of recession, and raising the prospect of one can “produce a negative amplification of the shock,” said Jagjit Chadha, director of the National Institute of Economic and Social Research. “Households may rein back expenditure and businesses could slow investment.”

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