LONDON (MNI) – The public has not lost faith in the Bank of
England’s inflation targeting, despite the long run of above target
outturns, Monetary Policy Committee member Ben Broadbent said in an
interview published in the Independent.

Broadbent also saw some encouraging signs for the UK amidst the
gloom of the Eurozone crisis. He said the financial system was better
positioned now to deal with shocks than it had been during the credit
crunch and there was a renewed sense of purpose in dealing with
underlying problems.

Inflation has been running above target since back in 2009 and
Broadbent says “You might have worried recently that people would begin
to lose faith in that (2.0%) target but, by and large, that has not
happened.”

He said it has been “a far slower recovery than would usually be
the case” but the current economic pain has a purpose, with banks
and companies strengthening balance sheets and the household savings
rate picking up.

The comments carried in the Independent come from the same
interview which was published, in part, in the Evening Standard on
Tuesday, as the two are sister papers.

In the Evening Standard piece Broadbent said the economy has slowed
and there is a “material chance” of a technical recession, Bank of
England Monetary Policy Committee member Ben Broadbent told the Evening
Standard.

The MPC’s forecasts, in the November Inflation Report, show near
flat growth in the fourth quarter of this year and first quarter of
next. If growth comes in only marginally less than the MPC expects that
would entail two consecutive quarters of negative growth – meeting the
definition for a technical recession.

In the interview, Broadbent notes the uncertainty created by the
turmoil in the Eurozone and warns that the credit easing set in place by
the Treasury, to try and boost funding for small to medium sized
enterprises, could be swamped by what happens in the euro area.

Asked about credit easing Broadbent said “Directionally it seems
reasonable to expect it to have some impact, but it is not clear how
much, or whether it would be sufficient, for example, to offset the
realisation of some of the worst risks of the Eurozone.”

Broadbent is downbeat about near term growth, but sees real
household income growth improving next year as inflation falls.

“Clearly things have slowed a lot since earlier this year and there
is a material chance of a technical recession,” he said.

Base effects will drive inflation down early in 2012.

“VAT is not going up again and petrol and oil prices look pretty
stable. That’s a big effect which will add to real household income,”
Broadbent says.

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

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