U.K. Recovery Has Been Somewhat Imbalanced: Walker

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Jan. 28 (Bloomberg) -- Ross Walker, Senior UK Economist at Royal Bank of Scotland, discusses what he considers an imbalanced recovery in the U.K. and possible actions of the Bank of England. He speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

Were we're still third quarter 2015. in august we had the first hike.

We were one of the earlier banks looking for an early rate rise.

The consensus has shifted.

I'm concerned about the medium term sustainability of growth.

I think we'll have a decent gleer 2014 but some of the props may fall away in 2015. particularly relations of the housing market and credit.

I think you need to keep an eye on what's happening in the u.s. and euro area.

I don't think they will be raising rates too far ahead of the fed or e.c.b.. if the u.k. economy is in a sweet spot, should we sit back and enjoy it?

No, i think they are reasonable questions.

It is -- i would say in the short-term, it is certainly threw unbalanced growth is better than no growth because at least if you develop a bit of momentum, we could see the recovery broadening out.

But really that is -- we have only seen partial rebalancing of the economy.

In today's numbers we'll get only an output breakdown which is not the best way of exposing the fragilities.

We have had no boosts to growth from net exports since the recovery began and the level of investments is below where it was at the cyclical trough.

I think we need to see growth bronged out.

That is big question for the year ahead.

How do sue see broadening out impacting on employment data?

The markets were caught off guard at the pace at which the unemployment rate is coming down in the u.k. do does this mean they will adjust forward guidance because it is tied to the speed at which unemployment comes down?

The guidance will have to be adjusted because we're closing in so fast on the 7% threshold.

Carney seems to be hinting they will make an announcement in february in the inflation report.

Hinting they may ditch this unemployment threshold and move to something else.

It is still vague what that might be.

Inflation on the other hand perhaps giving the bank of england a little breather in terms of the outlook for interest rates.

Where do you see ip nation heading in the u.k.? does that continue to give the u.k. and bank of england some time to breathe?

The unemployment rate has fallen faster than forecasters expected.

The game change is how quickly ip nation has fallen back to target.

When the bank of england launched guidance in august, they thought inflation today would be at 2.9%. it is actually at the 2% target.

They have only one target, the inflation target.

That is the key thing that is going to allow interest rates to be held for longer.

If we have this conversation of falling unemployment and higher, stickier inflation they would be in a more difficult position.

Fascinating to watch the interplay between inflation and unemployment numbers in the u.k. thank you.

We'll take a short break here at "on the move." after the break, we'll speak with the chief executive on europe's largest semiconductor maker.

Keep it here.

We're "on the move."

This text has been automatically generated. It may not be 100% accurate.


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