Inflation will go back to target this year but is not likely to stay there, according to the director of the Bank of England.
Andrew Bailey told the Treasury committee on Tuesday (February 20) the UK’s recession could already be over.
He said: “Our latest forecast suggests inflation will go back to target this Spring. It will not stay there, we think, because there are some particularly negative energy effects which will not be permanent.
“We are predicting a bit of a pick up towards the end of this year but nothing compared to what we saw in the past.
“Since our objective is to sustain inflation to target we are looking beyond that temporary period of being down at target. We want to get it down and keep it down as we were.”
This month it was revealed the UK had entered recession after GDP shrank by 0.3 per cent between October and December, following a 0.1 per cent fall in the quarter before.
Bailey added: “The economy appears to have seen a period of recession in the last two quarters of last year.
“Monetary policy has been restricted and it is also against a weak backdrop of slow growth on the supply side of the economy.”
He went on to say the recession is expected to be small or possibly already over.
“What I would say, all of this is happening in the context of the economy being at full employment, that is a very good story,” said Bailey.
“We think it is a very small recession and think possibly the economy is already showing distinct signs of an upturn.”
tara.o'connor@ft.com
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