Economy is still robust despite the pingdemic

THE economy will still grow by 7.25pc this year, the Bank of England has predicted – despite a slowdown caused by the ‘pingdemic’ and growing fears around the Delta variant.

Output climbed by a better-thanexpected 5pc in the second quarter of the year, but growth will slow to 3pc in the third quarter, the central bank said. Even so, the economy will reach its pre-pandemic level by the end of the year.

But inflation will climb to 4pc later this year – double the Bank’s target – as supply chain bottlenecks and staff shortages cause chaos.

Despite Threadneedle Street’s admission that the cost of living is set to soar, officials on the Bank’s Monetary Policy Committee (MPC) voted to keep interest rates steady at 0.1pc yesterday.

But there were some murmurings of dissent over the Bank’s £875bn money-printing programme, as one official, Michael Saunders, voted to reduce its size to £830bn.

The Bank re-started the programme, known as quantitative easing (QE), during the pandemic to inject more cash into the economy, and dropped interest rates to rock-bottom.

As activity has begun to pick up, some experts are worried that the economy could overheat and inflation will soar if the full £875bn QE programme goes ahead. However, the Bank thinks unemployment will not climb any further from 4.8pc – even when the furlough scheme, which is still paying the wages of around 1m staff, ends in September.

Governor Andrew Bailey said: ‘This points to the success of economic policy measures in avoiding a marked rise in unemployment, in the face of such a large downturn in economic activity.’