Invesco’s Greenwood: UK set for low growth in zig-zag recovery

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Invesco Perpetual chief economist John Greenwood has warned that the UK will face a low growth environment for the next few years as it looks to recover from the financial crisis.

Greenwood (pictured) has backed Bank of England governor Mervyn King’s view that the UK will see a “zig zag path to recovery” with “slow, gradual improvements”.

He says: “The economy will continue on a zig-zag path to recovery and the one thing is we will not see is a huge surge in growth as the underlying problem of trying to repair balance sheets remains.”

Greenwood adds that he expects to see a low-inflation, low growth scenario in the future, adding that the days of seeing the consumer prices index above 5 per cent are over.

He says: “I think an inflation rate of 1 to 3 per cent is the most likely scenario which will ensure we do not see hyper inflation. Regulators will also make sure there is enough liquidity in the market to prevent the chance of deflation.”

The chief economist also shunned the idea that more QE could lead to a spike for inflation.

He says: “Many people have the impression that the implementation of QE automatically leads to inflation but this isn’t necessarily the case.

“If you take Japan, for example, between 2001 and 2006 its central bank consistently implemented a quantitative easing process, but we saw very low levels of inflation.”