Miles Says Bank of England Can Do More If U.K. Slump Persists
“We may need more stimulus,” he said in an interview with Sky News television yesterday. “That will depend on how the headwinds holding back growth play out.” The bank’s Funding for Lending Scheme “will have some positive impact as we go into next year, but if it turns out that not enough has been done, that the economy’s going to stay in a recessionary state and that’s going to drive inflation down, there is more we can do. We have not run out of ammunition,” he said.
Bank of England Governor Mervyn King gave a gloomy assessment of the economy last week, saying gross domestic product may shrink in the current quarter and that the road to recovery will be “long and winding.” He held out the prospect of further asset purchases after the Monetary Policy Committee voted this month to halt the program at 375 billion pounds ($596 billion.)
Miles said yesterday that pressure on wages had allowed officials to keep monetary policy at this “very expansionary setting” and cautioned against tightening conditions too soon.”
“It would be a mistake to try and get back to more normal monetary policy too quickly when the recovery that we’ve seen has been pretty anemic,” he said.
He dismissed any prospect of a return to “more normal” growth rates in the near term. “It may not be three, six months but if you look beyond that, a year, 18 months, two years, I would expect we’ll get back to more normal rates of growth.”
The economy emerged from a slump in the third quarter, and with the euro-region debt crisis hanging over U.K. prospects economists say the risk has increased that the country will succumb to its first triple-dip recession since records began almost six decades ago.
Miles said he expects the forces that have hobbled the economy since the 2008 financial crisis to diminish. The squeeze on personal incomes from rising commodity prices is coming to an end, making him “guardedly optimistic” that consumer spending will pick up, he said.
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