That Sinking Feeling

Sky News business editor Michael Wilson

We aren’t in a recession, as economists would technically define it ( shrinking for economic growth six consecutive months) but I’m sure you’ll be feeling as if you’re in one. Suddenly, over the past few weeks, it seems as if the whole economy has slowed down and the dawning realisation of what a high oil price means is beginning to sink in. People are seeing more and more of their bills rise and are really feeling the effects of the credit crunch.

As a barometer of our shopping crazed economy, the British Retail Consortium usually presents a canny snapshot of what the national psyche is up to. Thus it’s a bit depressing to read in its latest consumer confidence survey that two thirds of Britons believe the country is in recession. One in five said that the economy was their biggest worry, and high interest rates, and presumably their debt, was the next biggest concern.

And during a slowdown like this one, more than half said that inflation was their main fear.

So last week’s decision by the Bank of England not to cut the interest rate will have ‘pleased’ these worriers. Although, as I said last week, it will be interesting to see how the Monetary Policy Committee manages to resist pressure to lower the base rate as the economy slows, as it surely will.

In fact, the profligacy of Labour’s loose fiscal stance , and the Bank’s almost impossible task of trying to reign in inflation while the economy slows is unprecedented and very dangerous territory. Add to that the very public tussling over the appointment of a new Deputy Governor. This is not a time for a central bank and one of the key guardians of the economy to have a vacancy on the bridge.

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