–Adds Detail To Version Transmitted At 1304 GMT
–BOE Broadbent: If Econ. Outlook Changes More Could Be Done On Policy
–BOE Broadbent: Domestic, Global Growth Outlook Has Worsened

LONDON (MNI) – Bank of England Monetary Policy Committee member Ben
Broadbent said when he joined the MPC earlier this year he was on the
hawkish side of the policy debate, but is now on the middle ground.

In a BBC Radio 4 interview, Broadbent said the growth outlook had
worsened domestically and globally, high inflation had not fed through
to higher wages and he had dropped his hawkish views.

“I was probably on that (hawkish) side of the debate when I arrived
at the Bank earlier this year,” Broadbent said.

“At that time I thought that the global economy, while not growing
very quickly was growing at a reasonable rate. I was concerned that a
long period of above target inflation might dislodge some medium term
expectations of future inflation and find their way into other prices
and wages,” he added.

“But that hasn’t happened and … the outlook for growth
domestically, as well as globally, has weakened in the last three or
four months so I would describe myself now as much more in the middle of
the debate. If the facts change one should change one’s mind” Broadbent
said.

At the August meeting, all nine MPC members voted to hold Bank Rate
at 0.5% with Adam Posen also voting for an additional stg50bln of asset
purchases.

He said UK productivity growth had been exceptionally weak and as a
result “the capacity of the economy to grow without inflation is also
lower.”

Despite this he left the door open to further policy easing.

“Even allowing for this (productivity) hit we have had, we still
believe there is significant spare capacity in the economy and that
means that interest rates are low and that if that outlook changed in a
way which would lower the prospects for inflation over the medium term
maybe more could be done,” he said.

“But at the moment the judgement is that the economy recovers to
somewhere where spare capacity is eaten up and that the stance of policy
is therefore appropriate,” Broadbent said.

Broadbent said consumer spending has been weak for some time but
this is a symptom, not a cause, of what is happening in the UK economy.

“The more fundamental drivers have been the weakness in the global
economy, the continuing impact of the unwinding from the financial
crisis, particularly in continental Europe, the rise in energy prices,
especially in the spring,” he said.

Broadbent said what was going on at present was not the start of a
new credit crunch, but a continuation of the financial crisis that
started four years ago, and that the credit crunch had longed last than
he had anticipated.

“I wouldn’t describe it as a new credit crunch. The truth is that
this is all part of the same process,” he said.

“The epicentre has moved, broadly speaking, from the US mortgage
market to sovereign debt markets, particularly in Europe. But the
underlying strains on banks’ balance sheets are the same and as a result
of that strain, and their efforts to build-up capital, continue to
restrict the supply of credit to the economy,” he said.

“It has been here for longer than people expected, certainly than I
expected it to last, at least back in 2009 immediately after the worst
of the crisis,” he said.

The BBC Radio 4 interview is Broadbent’s first media interview
since joined the MPC on June 1 from Goldman Sachs.

His only other public appearance was as a prospective MPC member
at his confirmation hearing at the Treasury Select Committee on May 17.

Broadbent’s comments in his Goldman’s days suggested he was likely
to be hawkish, as he said interest rates may well have to rise earlier
than BOE Governor Mervyn King would like and that fiscal tightening need
not weigh heavily on growth.

As Broadbent says, however, as the facts have changed he has
changed his mind and he has voted for unchanged policy at every MPC
meeting he has attended.

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

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