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Andrew Balls criticises UK economy

Andrew Balls, head of European investments at Pimco and brother of Labour minister Ed Balls, has today issued a research note in which he is highly critical of the way that the UK economy is being handled. Like so many economists in the UK he believes that the threat of inflation could take second place behind the need for growth in the UK economy, something which could store up problems for the UK government in the future.

He believes that the Bank of England is unlikely to increase base rates in the short to medium term, as this could potentially curtail a recovery, thereby placing pressure on the inflation number which could rise in the short to medium term. If the timing is incorrect we could see inflation take off before the Bank of England is ready and willing to increase base rates, to reduce credit, and this could have a major impact on the medium term performance of the UK economy.

There are so many different issues to consider for the Bank of England and the UK government and ultimately because nobody in the UK has ever experienced these wild swings in economic performance it is difficult to know what to do. Timing will be of the essence and if the Bank of England moves UK rates too high too quickly the recovery could be curtailed, but if rates remain low for too long then inflation could cause major problems in the medium term.

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