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Risk of ‘quantitative easing’ which does nothing, both in theory and now in practice, but no ‘risk’ of ‘VAT holiday’ – eliminating the value added taxes – which would end the recession and lower prices?
And they are largely energy independent, as least in the short term.
UK: GDP SURPRISES ON THE DOWNSIDE; RISK OF MORE QE
The range of forecasts for GDP in Q3 was from unchanged to up
0.7% qoq. Not a single forecaster had expected negative growth,
but today’s figures showed the economy continuing to contract in
Q3. Growth has been negative now for 6 straight quarters – some-
thing we have never seen before in the UK. Output is down by 6%
since the peak – a similar fall to the contraction we saw in the
early 1980s recession. In its August Inflation Report, the BoE
had been forecasting growth of roughly 0.1% for Q3 – in other
words this is a 0.5pp downside surprise. This will, all things
being equal, raise the amount of spare capacity in the economy
and push down on the Bank’s inflation forecasts going forward.
The chance of more QE in Nov has been increased substantially.