–Worsening Overseas Growth Outlook Key To Pulling Rate Hike Call
LONDON (MNI) – The Bank of England’s Monetary Policy Committee is
unlikely to cut Bank Rate from its current 0.5% but will instead use
quantitative easing if things take a turn for worse, MPC member
Martin Weale said in an interview on BBC Radio Scotland.
Weale, who had been voting for a 25-basis-point rate hike, switched
to back unchanged policy at the August MPC meeting. He told Radio
Scotland that the deterioration in the overseas growth outlook and euro
area woes were key to the change in his rate call.
Asked why he had changed his policy stance Weale said
“Internationally the economic situation looks to be a bit weaker. We
have just seen that in the euro area there was very little economic
growth in the second quarter of the year. In the United States things
don’t look as bouyant as people had thought.”
He added “We still have in the background the … still unresolved
financial problems of some countries in the euro area, and it is
difficult to believe that those will prove favourable to the economic
situation.”
Weale said UK growth could pick up in the third quarter, with Q3
growth numbers quite likely to “look better than they did in the second
quarter.”
“A part of this, of course, is because we had the Royal Wedding
Bank Holiday and there aren’t special factors like that in the third
quarter.”
“Underlying growth is nevertheless likely to be somewhat weaker.
Looking into next year I think it is perfectly possible that we will get
back towards trend economic growth,” he said.
–London bureau: +4420 7862 7491; email: drobinson@marketnews.com
[TOPICS: M$B$$$,MFBBU$,M$$BE$,MT$$$$]
