There is a \u201crising\u201d risk that the UK economy could see a \u201cmore forceful downturn\u201d due to higher borrowing costs, a policymaker at the Bank of England has warned.<\/p>\n
Alan Taylor, a member of the central bank\u2019s nine-strong Monetary Policy Committee, said there was a small but growing chance that the UK will witness negative growth and \u201crecession dynamics start to kick in\u201d.<\/p>\n
It came as the bank rate-setter cautioned that it is \u201cincreasingly likely\u201d that the UK economy will fall into a \u201cweakened state for a sustained period\u201d with inflation sliding below target levels.<\/p>\n
He said he believes this could lead to \u201cundue damage\u201d to economic activity in the UK.<\/p>\n
In a speech at King\u2019s College Cambridge, the rate-setter said he thinks the likelihood of a \u201csoft landing\u201d following the recent uptick in inflation is now receding.<\/p>\n
Professor Alan Taylor is a member of the Monetary Policy Committee (House of Commons\/UK Parliament\/PA) <\/p>\n
It comes amid a slowdown in economic growth in the UK after strong activity in the first quarter ahead of expected tariff disruption.<\/p>\n
The Bank of England has been steadily reducing interest rates over the past year as it seeks to reduce inflation, with the central bank holding rates at 4% in last month\u2019s meeting.<\/p>\n
But Mr Taylor is among economists to raise concerns that interest rates still remain too high and could hamper economic growth.<\/p>\n
On Tuesday, he said he believes \u201cwe may have braked too hard, such that inflation cannot smoothly return to target with the economy close to potential\u201d.<\/p>\n
The Bank is seeking to bring inflation down from its latest rate of 3.8% to the target rate of 2% set by the central bank and the Government.<\/p>\n
(PA Graphics) <\/p>\n
The economist said it is now \u201cincreasingly likely\u201d that there is a \u201cbumpy landing\u201d scenario where inflation undershoots the 2% target.<\/p>\n
He raised concerns that inflation \u201cgoes below target in late 2026, and the economy moves into a weakened state for a sustained period, with output and employment below potential, leading to undue damage to economic activity\u201d.<\/p>\n
Meanwhile, he added that there is a worry that fiscal policy could contribute to a third scenario, he describes as a \u201chard landing\u201d.<\/p>\n
\u201cThis was a remote and low probability event a year ago, but the risk is rising,\u201d Mr Taylor added.<\/p>\n
\u201cIn this scenario, weak demand at home can lead to a more forceful downturn, where recession dynamics start to kick in that can be very difficult to contain or even reverse.<\/p>\n
\u201cThe economy has been flirting with zero growth, and the realisation of negative readings could easily change the future path for the worse. The probability of this outcome is now not trivial.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"There is a \u201crising\u201d risk that the UK economy could see a \u201cmore forceful downturn\u201d due to higher…\n","protected":false},"author":2,"featured_media":200749,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[87194,3490,84,13668,62,1294,1431,10515,87195,56,1893,54,55,87196],"class_list":["post-200748","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alan-taylor","tag-bank-of-england","tag-business","tag-economic-activity","tag-economic-growth","tag-economy","tag-inflation","tag-monetary-policy-committee","tag-mr-taylor","tag-uk","tag-uk-economy","tag-united-kingdom","tag-unitedkingdom","tag-weakened-state"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/200748","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=200748"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/200748\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/200749"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=200748"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=200748"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=200748"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}