Bank of England Deputy Governor Charles Bean said policy makers are “disappointed” with the impact of the pound’s depreciation on the rebalancing of the economy and there could be a case to see it fall further.
“It’s fair to say we have been disappointed about not getting more a kick to the recovery from net exports,” Bean told lawmakers on Parliament’s Treasury Committee in London today. “There has been some rebalancing, but not anywhere as much as we would have liked to have seen.”
Bean also said that the “puzzle” may be related to Britain’s services exports.
While sterling has fallen about 25 percent on a trade-weighted basis since the start of 2007, there has been “unexpected weakness” in the exports of financial and business services since the global crisis, he said. It is not clear to what extent officials can expect that demand to come back, or if it is permanent, the deputy governor said.
“You might think some of this might be relatively persistent -- the bit that’s connected to the exports of banking services,” Bean said. “If that’s the case you might take the view we need an even bigger depreciation to make our exports of goods and other services more competitive.”
Still, “I’m not convinced that we necessarily need a nominal depreciation to get that,” he said.