Daily Archives: October 6, 2011

By Bill Martin

Has the UK’s economy been structurally weakened by the banking crisis? Policy makers think so – in spades. Despite the depth of recession and limp recovery, they believe that the gap between output and some notion of the economy’s productive potential is not that far from zero. The Office for Budget Responsibility concludes that most of the budget deficit is structural rather than cyclical and, until very recently, some members of the Bank of England’s Monetary Policy Committee were pressing for higher interest rates. Supply pessimists like former MPC member Andrew Sentance believe demand stimulus would serve only to push up inflation. Read more