BoE economist warns of stagflation

[yoganmahew]

At least that’s what I think she’s warning about, she doesn’t actually use the word:

A downward spiral of falling house prices and reduced mortgage lending poses the biggest short-term threat to the economy, says a leading economist.

Kate Barker, a member of the Bank of England’s Monetary Policy Committee, warned that the bank would not be able to stop this in the short term

Ms Barker warned her audience that it would be hard for the MPC to take this into account quickly in its monthly deliberations on interest rates.

“The consequent adverse impact on growth could prove difficult to turn around quickly, potentially resulting in a protracted period of low output growth and below-target inflation,” she said.

She hinted that ideally, interest rates should be cut further to head off this possibility.

But she pointed out that strong upward inflationary pressures in the economy made it more likely than not that the Bank’s inflation target would be breached later this year.

In the short term, she warned, the economy faces “an overall sharp slowdown in output growth”.

“protracted period of low output growth and below-target [sic] growth” = stagflation?