LONDON (MNI) – The Bank of England Monetary Policy Committee’s
decision to sanction stg75 billion in quantitative easing at its October
meeting, as opposed to some other amount, was not a precise process, MPC
member Ben Broadbent told the Financial Times.
Broadbent told the FT that he looked at the Bank’s research on the
impact of the first wave of QE and then estimated the effect of QE on
the output gap a year ahead – but he stressed it was all an imprecise
exercise. In the interview he also highlighted how what the MPC does
with QE going forward is very much dependent on what happens overseas,
and in particular in the euro zone.
“It can’t be (precise), really. Nor is it precise when one is
changing interest rates,” Broadbent said when asked about the amount of
QE.
In the interview, Broadbent notes the uncertainty of the economic
outlook, which he describes as bi-modal, with one scenario showing a
marked improvement and another a marked downturn.
The total amount of QE that will eventually be sanctioned is
clearly dependent on which of these scenarios materializes.
Asked about how monetary policy could offset a full blown crisis
in the euro zone, Broadbent says while it is not right to say they could
do nothing, other policy measures would come to the fore.
He denied there was any practical limit to the total amount of QE
the central bank could do, saying “the limit is what the correct policy
is.”
On the economic outlook, Broadbent backed the view the financial
crisis has had a deep impact on output and will continue to weigh on
future output.
“We are … unfortunately following a pattern seen after other
financial crises in which domestic productivity grows more slowly,
materially slowly,” he says.
–London newsroom: 4420 7 862 7491; email: ukeditorial@marketnews.com
[TOPICS: M$B$$$,M$$BE$]
