Bank of England policy maker Martin Weale said the argument for extending stimulus again has increased after the economy slipped into its first double-dip recession since the 1970s.
“I’m certainly feeling that the argument is stronger than it would have been if the economy had shown economic growth,” Weale said in an interview broadcast on BBC Radio Newcastle today. “I don’t want to come to a decision now. It’s a decision I’ll come to” at the policy meeting in May, he said.
Data yesterday showed U.K. gross domestic product fell 0.2 percent in the first quarter after a 0.3 percent decline in the previous three months. The Bank of England is in the final month of a 325 billion-pound ($526 billion) bond-buying program and policy makers will decide on May 10 whether to extend so-called quantitative easing.
While the economic recovery has struggled to gather momentum, policy makers have also said that inflation may turn out faster than they previously forecast as rising energy costs stoke price pressures. Weale said that while the GDP figures were “something of a disappointment” and “worse than I had expected,” recent news on inflation also “hasn’t been good.”
Bank of England officials will have new quarterly economic forecasts at their policy meeting in May. Their current 50 billion-pound round of bond purchases started in February.
“I, and I’m sure the other members of the MPC, will take into account when we come to the decision in May both these GDP figures and also the recent news on inflation,” Weale said. “I couldn’t imagine that an increase in interest rates would provide support to the economy” and quantitative easing “is the policy option open to us.”
Data this month showed inflation accelerated for the first time in six months in March, with the rate rising to an annual 3.5 percent.