Bank of England Monetary Policy Committee member Ben Broadbent defended the openness of the U.K. economy and said international developments are just as important for the outlook as domestic ones.
“Thanks to the deep integration of international banks and capital markets, problems that arise in one part of the world can rapidly arrive on our own shores,” Broadbent said in a speech in London today. “It would be a big mistake, however, to imagine that the system brings us only problems.”
While the U.K. economy expanded at the fastest pace since 2007 last year, fueled by domestic demand, the Bank of England has warned that growth can only be sustained if the improvement broadens. Crediting domestic policies entirely is misleading because the international environment is important, and “it matters more than via trade volumes alone,” Broadbent said.
Broadbent also said that European Central Bank President Mario Draghi’s efforts to tackle the euro-area debt crisis in 2012 show the positive impact of strong global ties.
“U.K. policy alone cannot explain why, coincident with the fall in funding costs for U.K. banks, you also saw a steep decline in those for banks in continental Europe,” he said in a speech at the Institute of Economic Affairs conference. “That, surely, had more to do with the ECB’s declaration that it would ‘do whatever it takes’ to hold the euro together, and the backing that statement received from core-country governments.”
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