Goodhart Says BOE Stimulus to Hinge on Public-Spending Review, GDP Report

The Bank of England’s decision on whether to expand its stimulus plan will hinge “quite a lot” on this week’s public-spending review and gross domestic product data due on Oct. 26, former policy maker Charles Goodhart said.

The case for adding stimulus is not “cut and dried,” he said in an interview in London today. “It will depend quite a lot on what the first estimate of third quarter GDP is” and “on what the reaction to the spending review itself is.”

Finance minister George Osborne will give details of Britain’s deepest spending cuts since World War II on Oct. 20. The Bank of England’s Monetary Policy Committee has split three ways on whether to expand stimulus, with policy maker Adam Posen arguing that more bond purchases are necessary and Andrew Sentance seeking an interest-rate increase to fight inflation.

“Nothing is cut and dried at the moment,” Goodhart said. “It could happen, there’s no question about it, but it would depend on how the economy seems to be developing.”

The Bank of England’s next monthly decision will be on Nov. 4, and governor Mervyn King will present the bank’s new quarterly economic forecasts on Nov. 10.

The U.K. economy’s pace of growth slowed by more than half in the third quarter, according to an estimate by the National Institute of Economic and Social Research released on Oct. 8. GDP rose 0.5 percent compared with a 1.2 percent gain in the three months through June, the report showed.

Goodhart spoke while attending a conference organized by the Financial Markets Group of the London School of Economics.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net