LONDON (MNI) – Consumption growth is set to pick-up strongly in the
second half of this year but the euro area still poses the biggest
threat to the UK economy, Bank of England Monetary Policy Committee
member Ben Broadbent says.
In an interview with UTV Live in Belfast Broadbent said Bank Rate
was low because of tight credit and the need for the financial system to
repair itself, and neither of these things were going to happen quickly.
While he was upbeat about the consumption outlook, he said problems
remained to be solved in the Eurozone.
“We expect consumption growth to pick up later this year, and as
the supply of credit resumes we would expect investment to start growing
strongly as well,” he said.
Asked about the outlook for interest rates Broadbent said “they’re
very low for a reason. The primary reason being the tightness of credit
and the repair that has to be done to the financial system. And that’s
not going to be over anytime soon.”
He was questioned about the prospects for local business and said
exporters had been helped by the fall of sterling and “helped too by the
fact that although we hear a lot of doom and gloom about Europe the rest
of the world is still growing at a reasonable clip.”
Broadbent said recent policy decisions in the euro area – he has
previously highlighted the impact of the European Central Banks Long
Term Repo Operations – had given support to the banks and this has been
“very important.”
“But I don’t think we should imagine, hopeful as it is, that these
more recent policy actions have solved everything. There are risks
that still remain. If the committee had to say what was the biggest
single risk facing the UK economy, it is still the situation in the
Eurozone,” he concluded.
–London newsroom: 4420 7 862 7491; email: drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$]
