Could the market storm blow the recovery off course?

The further bout of financial market turmoil last week has raised fears that a sharp slowdown in the UK economy may be on the horizon. But the strength of the labour market, loose monetary policy and the prolonged boost to households’ spending power from low oil prices should help the economy to ride out the storm.

Clearly, if equity prices were to continue to fall, the danger of a larger impact on the real economy would rise. So the falls in equity prices add to the growing list of downside risks to growth this year and are yet another reason to think that the MPC will not hike rates soon.