Economic growth in Britain will be "materially" lower in the fourth quarter, after an unexpectedly strong boost from the Olympic Games, and it will remain weak for the next couple of years, Bank of England chief economist Spencer Dale told the Times newspaper.
Dale welcomed last week's news that Britain's economy grew by a "strong" 1 percent in the second quarter, but warned that the next set of data would look much worse by comparison.
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"In terms of the headline numbers I expect to see a very sharp fall back," he said, explaining that the one-off boost from the Olympic Games was "even greater than we had expected".
A reduction in the cost of funding for banks, positive inflation figures and the Bank's new "Funding for Lending" program of cheap loans for banks are all good news for the economy, but several negative factors will weigh on growth for some time, Dale said.
Recent rises in energy prices, for example, are expected to force inflation back up 2.5 percent in the next few months.
" e have had a series of utility price increases and that will feed into households' real incomes, he said."
Dale, who opposed the British central bank's most recent expansion of its government bond-buying program last July, pointed to inflation figures as he repeated his call for caution around quantitative easing.
"Inflation with a 'two' in front of it is encouraging, but normally we would have expected an economy this weak for inflation to be quite a bit below target, and we are not seeing that," he said.
"This stickiness in inflation is something we need to take into account when we are thinking about exactly how much more stimulus we need to apply."
However, there are circumstances in which Dale said he could imagine voting for further asset purchases.
Recent strengthening in the pound is "not good for us in terms of keeping this sort of rebalancing of the economy" towards exports, he said.
"I think it is something we are keeping a close eye on. If the exchange rate shifted up very dramatically, other things being equal you would have to take that into account in terms of policy."
(Reporting by Stephen Mangan; editing by Christopher Wilson)