–Encouraging EZ Policymakers Getting To Grips With Problems

LONDON (MNI) – Quantitative easing will help the economy and
inflation will fall, Bank of England Monetary Policy Committee member
Ben Broadbent said Wednesday, but the chance of any dramatic improvement
depends on what happens elsewhere in the world.

Broadbent, in a BBC Radio Lancashire interview, said the rise in
inflation was due to temporary factors, and he took encouragement from
signs euro zone policymakers are beginning to get to grips with the
area’s problems.

“We are pretty confident that much of the inflation we have seen
over the last year is due to factors that are identifiably temporary and
that will go away,” he said.

Broadbent said the rise in value added tax and energy prices had
been key factors driving up inflation, which hit 5.2% on the CPI measure
in September.

“Those two have contributed over 2 percentage points of the
increase … and will go away in the new year,” he said.

“So I think the prospects for inflation in the near term are pretty
clearly for a fall. That is not to say that overall the economy is going
to improve dramatically, much depends on what happens elsewhere in the
world,” Broadbent said.

Broadbent said he was confident the MPC’s decision to ease policy
further “would have some effect.”

“That (extra QE) is designed to increase the amount of money
circulating in the economy and to raise some asset prices and thereby
raise spending and demand, and I am confident it will have some impact.”

“It is also encouraging that over the last two to three weeks
policymakers in Europe are showing signs of getting to grips with some
of the big problems there, which in many ways underlie, and are the deep
causal factors behind, the recent weakness we have had,” Broadbent said.

The MPC member said it was too early to talk about the “green
shoots” of recovery, but maybe the “precursors” to them.

The minutes of the October MPC meeting, out earlier Wednesday,
revealed the MPC voted unanimously for an extra stg75 billion in
quantitative easing.

The MPC looked at the case for QE in a range of stg50 billion to
stg100 billion, arguing there were ‘compelling’ reasons to relaunch QE.

MPC members are on a regional tour of the north west, and further
public comments from them are likely to emerge Wednesday and Thursday.

–London newsroom: 4420 7 862 7491; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,M$$BE$]