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By David Robinson
LONDON (MNI) - Bank of England Deputy Governor David Ramsden gave a
cautious welcome to the improvement in UK productivity in recent data, but said
he would have to wait-and-see whether it would persist with Brexit-related risks
to both the upside and downside.
Ramsden, in remarks in a debate on productivity in Cambridge, highlighted
the exceptionally prolonged weakness of UK productivity growth post financial
crisis, and expressed doubts whether it was really coming to an end. He offered
no direct comment on current monetary policy setting.
"The most recent data show signs of productivity growth rising in the
second half of 2017. But quarterly growth has been volatile of late and we'll
have to wait and see whether the pickup is sustained in the near-term," Ramsden
The hints of higher productivity growth have to be viewed alongside the
dampening effects of UK demographics and lower net migration when considering
potential growth, Ramsden said.
The BOE Monetary Policy Committee estimates that UK potential growth is
around just 1.5%, with the MPC forecast for annual growth to run around 1.75%
will generate inflationary pressure.
"Overall, it's the MPC's view that the economy's speed limit is likely to
be around 1.5%. That means that with very little spare capacity in the economy,
even the unusually weak actual growth of around 1.75% over the forecast
horizon," Ramsden said.
Reduction of Brexit uncertainty could eventually support higher business
investment but short-term the process of leaving the EU and moving to a new
trading relationship could continue to weigh and investment and productivity.
"The dampening effect of Brexit on productivity growth - both through the
effect of uncertainty on business investment in the short run and through the
need to anticipate and respond to post-Brexit trading relationships - is likely
to continue for some time," Ramsden said.
--MNI London Bureau; tel: +44 203-586-2223; email: firstname.lastname@example.org