“Tightening” or “liberal”? This is a problem. Post-crisis economic recovery is weak, the UK’s fiscal policy decisively choose the former, while monetary policy makers are still undecided.

Soon to be released Tuesday, the UK’s third quarter gross domestic product (GDP) or preliminary data revealed in this decline. Economists expected value in the third quarter from the second quarter of UK economic growth of 1.2% to 0.4%. Analysts believe that the upcoming third-quarter GDP data will prompt the Bank of England may be in the coming months to take further quantitative easing.

British Chancellor of the Exchequer George Osborne announced last week the Government to cut the next four years 81 billion pounds (about 128 billion U.S. dollars) budget details. At the same time, the Bank of England minutes released the same day, have shown that monetary policy is still within the Commission held on the future monetary policy, three different views.

Financial “deficit reduction” radical and decisive

“Today the British take a step back from the brink of the day.” Osborn said that day.

The reductions of up to 81 billion pounds plan include the next four years (2011/12 ~ 2014/15) various government departments to cut spending by 70 billion pounds of the benefits. Osborne also confirmed the end of 2015, 49 million jobs disappeared. This means that the UK National nearly 1 / 10 of Civil Service might lose their jobs, which is the most serious since World War II Britain’s layoffs.

Substantial cuts in government spending is to reduce the British Government has been as high as 155 billion pounds in deficit. This rather radical “deficit reduction” plan despite the decisive, but also difficult. British government under a huge “stake”, the assumption behind this policy is: the public sector “tighten their belts” to maintain a relatively low borrowing costs to the revitalization of the private sector, and will not undermine the UK has been slow the pace of economic recovery.

This “bet” also marks the UK as the global economic recovery is still fragile to tighten fiscal policy when the “laboratory.” Economists have been on the Government during the economic recession in the fight against the appropriate role of the argument over half a century now, inherited the British economist John Maynard Keynes theory of President Barack Obama and his economic advisers, believe that the deficit When the economy is necessary to replace private sector demand is low, despite the recognition of the need to reduce the deficit in the long term. The United States has urged European countries not to be too aggressive to cut spending, worried that this will be the global economy into recession again.

But in Europe, from Ireland, Greece, to Germany and France, “tightening” has become the slogan of the European landmark.

Monetary policy is the “fork in the road”

Compared with the decisive fiscal policy, the Bank of England’s monetary policy to “tangle” is much more. In the economic slowdown and high inflation, the conflict signal, whether to further inject more liquidity to the economy? Bank of England Monetary Policy Committee (MPC) 10 月 20 to discuss interest rates this month released the minutes clearly show that central bankers now “soldiers in three columns.”

MPC members are concerned that some of the day the Government announced a substantial “deficit reduction” plan will be the British economy into recession, they argue the central bank should restart the quantitative easing policy, namely to reduce the long-term bond repurchase rate to stimulate economic growth.

Others are more worried about inflation – up to 3.1% inflation rate since last December and has since remained high and well above the Bank of England’s 2% target level. They believe in a relatively high inflation rate in the restart when the quantitative easing policy may have caused the credibility of the Bank of England, because one of the central bank’s main responsibility is to maintain price stability.

The third view is that “inaction”, which is most of the undecided members of the temporary decision.

This is the August 2008 Bank of England for the first time since there is such a “fork in the road” situation. Britain and the United States the opposite situation. Faced with high unemployment and low inflation, the Fed is expected to be meeting on interest rates early next month to announce further quantitative easing policy to stimulate the U.S. economy. At the same time, the European Central Bank began to consider withdrawing support for the banking sector as part of unconventional policies.

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