30 January 2006, 15:40  UK MPC, Barker: Growth may fall short of BoEґs forecasts

Monetary Policy Committee member Kate Barker has warned that UK economic growth may fall short of the Bank of England's forecasts, UK daily the Guardian reported. "There are question marks about whether the pace of growth is going to prove strong enough, and this is the question for the February forecast round," she told the paper. The MPC will issue its latest forecasts on growth and inflation in its next inflation report on February 15. In its November inflation report, the MPC forecast growth in 2006 to start gaining momentum, with annual growth rising to between 2-3 pct The poor response of manufacturing output to the robust growth in the world economy is "precisely one of the reasons why since November I have been a little bit less confident about the forecasts we produced (that month)," she said. "You're starting from a position where to keep inflation on track in the longer term you do need to have growth picking up," she told the Guardian. The MPC is charged with targeting inflation at 2.0 pct over a two-year horizon. Barker is unconvinced that the recent pick-up in the housing market and apparent rise in consumer spending over Christmas will be maintained through the first half of the year as incomes are squeezed by higher oil and gas prices as well as rises in council tax bills. Earlier this month, the MPC voted to leave interest rates on hold, with just one member, Stephen Nickell, opting for a rate cut. Barker said she did not join Nickell in voting for a cut because although the inflationary pressures from higher oil prices had not materialised as feared, growth did pick up in the fourth quarter. Figures last week revealed that UK quarterly economic growth rose back to its trend rate of 0.6 pct for the first time in a year in the final quarter of 2005. Over 2005 as a whole, growth was 1.8 pct. Inflation, however, moved back down to the target 2.0 pct in December. Barker nevertheless believes the strong world economy should eventually feed through to better exports and higher investment, helping to rebalance the economy away from the consumer, while the recent jump in gas prices could help push up inflation. "I would not necessarily sign up to the view that inflation will inevitably fall back over the next few months," she told the Guardian

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