Bank of England policy maker Martin Weale said he’s comfortable with the central bank’s current level of stimulus and that it would be appropriate to expand support if the recovery weakens “substantially.”
“If growth were to be substantially weaker” and there was an impact on inflation, “it would be entirely appropriate for monetary policy to look at ways to stimulate the economy further,” Weale, who joined the Bank of England in July, said at a Treasury Select Committee hearing in London today. “One way would be quantitative easing.”
The economy is showing signs of cooling after expanding at the fastest pace in nine years in the second quarter. Weale joined the Monetary Policy Committee as it split on whether the economy faces a bigger threat from inflation or weaker growth. Data today showed inflation unexpectedly remained above the government’s 3 percent upper limit for a sixth month in August.
Policy maker Andrew Sentance has voted to increase interest rates from a record low 0.5 percent since June, arguing inflation poses the greater risk. Minutes of the central bank’s August decision show Weale voted with the majority of the committee to keep interest rates and the bond-purchase plan unchanged. It will publish the minutes of this month’s meeting on Sept. 22.
“I think the economy is recovering,” said Weale. “That recovery is likely to be fitful, but I am comfortable with the policy setting that we have.”
Services and manufacturing growth faltered in August, and officials have warned the recovery may weaken as the government implements the biggest budget squeeze since World War II to reduce the record budget deficit.
Still, Britain may start to benefit from the pound’s decline over the past three years, Weale said. The currency has fallen by a about a fifth on a trade-weighted basis since the start of 2007.
The economy “has become more competitive because of the exchange-rate movement,” Weale said. “We have seen some signs of that having an impact recently.”