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Bank of England's Monetary Policy Committee member Andrew Sentance sees substantial upside risks to energy prices over the recovery as demand increases across the global economy. Against the background of supply constraints, this creates the potential for continuing price volatility, he said in a speech in London on Monday.
At the national level, the global economy is an important source of volatility for both economic growth and inflation going forward. The British economy cannot be isolated from major global economic shocks or from global price volatility affecting energy and other commodity prices, said Sentance.
He added, "What we can do is to ensure that policy interventions are in a stabilizing direction and are consistent with the medium term objective of economic growth underpinned by low inflation, which is what I have sought to do as a member of the MPC."
Recent experience reminded that the new global economy of the 21st century is also potentially volatile. He stated, "If stability does return, as I hope it does in the coming recovery, we need to be looking very carefully to see where the next big global shock might be coming from." And the energy market is one of the prime candidates we need to keep an eye on, said Sentance.
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