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Tuesday, 27 November, 2001, 15:20 GMT
Economics guru warns on UK recession
The Bank of England
There is a one-in-10 chance of a recession in the UK, says the central bank
The threat of inflation in the UK is greater than the Bank of England's Monetary Policy Committee thinks, according to one of its nine influential members.

Sir Edward George, governor, Bank of England
Sir Edward deems the risks of a recession very, very small...
The MPC's most recent forecast predicted that there was a one-in-10 chance of a recession in the UK.

"In broad terms, I still think that the probability of a recession in the UK is significantly less than 50%, but it's significantly higher than the projection here [in the MPC's recent inflation report]," Sushil Wadhwani told a parliamentary committee.

Mr Wadhwani's prediction was much gloomier than that of the Bank's governor, Sir Edward George.

"It's a very, very small change [of recession]," Sir Edward told the parliamentary committee.

So while economic growth in the UK is slowing down, the weakness is not expected to last long, agreed Sir Edward's deputy, Mervyn King.

Global impact

In general, the optimists and the pessimists within the Bank agree that the UK economy will suffer a slowdown.

Sushil Wadhwani, member of the Monetary Policy Committee, Bank of England
... but Mr Wadhwani believes the MPC has underestimated the risks of a recession
But they disagree about when growth will bounce back.

"We have seen a much faster growth rate in the third quarter," Mr King told the parliamentary committee.

"We do expect quite a slowing of growth in the next two or three quarters [in the UK], before the economy starts to pick up," he said.

"I think the global economy will recover perhaps a little later, and more weakly, than we have in our projection," Mr Wadhwani told the parliamentary committee.

"The profit squeeze that we have in the US will almost certainly imply that we have more layoffs than we have in our projection," Mr Wadhwani said.

Mr Wadhwani has long been seen as the MPC's most pessimistic member, consistently calling for cuts in interest rates to insulate the UK economy from weakness abroad.

See also:

27 Nov 01 | Business
Germany 'is already in recession'
21 Nov 01 | Business
Little argument over UK rate cut
14 Nov 01 | Business
UK economy to recover in 2003
13 Nov 01 | Business
UK inflation holds steady
14 Nov 01 | Business
Back to rising unemployment
08 Nov 01 | Business
Sharp cut in UK interest rates
08 Nov 01 | Business
UK interest rates could fall again
26 Nov 01 | Business
US officially enters recession
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