Economy is still 'anaemic' warns the Bank of England

By SIMON DUKE FOR MAILONLINE
Updated: 03:41 EST, 23 October 2009

Bank of England deputy governor Paul Tucker warned of the risk that the UK could see 'anaemic' growth when it comes out of recession.

In a speech to London financiers yesterday, Tucker said that the outlook for the economy remains 'highly uncertain'.

'One of the biggest questions is whether, given the policy stimulus, recovery will be anaemic or whether we can attain the above-trend growth needed to absorb the slack in the economy necessary to ameliorate downward pressure on inflation,' Tucker said.

The future for the economy remains uncertain, the Bank of England warned yesterday

Anaemic growth would lead to inflation undershooting its target, he added.

His comments came ahead of the release of key third quarter GDP figures due today, which economists expect to show the economy has returned to growth with a 0.2 per cent increase.

Meanwhile, credit-starved businesses are still struggling to gain access to affordable loans, according to a BoE report.

Despite signs of thawing in wholesale money markets, banks are still charging hefty arrangement fees and slapping extravagant rates of interest on business loans, the study found.

'Fees and commissions have continued to increase for corporates over the past three months,' it said.

There were signs, though, that the credit crunch is beginning to ease slightly.

Companies repaid £800million of debt in August, down from a record £15.4billion the previous months. Banks have also signalled that more cash will be channelled into business lending between now and the end of the year, the BoE said.

Economists believe the improvement could be down to the BoE's money-printing scheme, which has seen an extra £175billion pumped into the banking system.