LONDON (MNI) – The Bank of England’s Monetary Policy Committee will
sanction more quantitative easing if necessary in February, when the
current round of asset purchases ends, BOE Deputy Governor Charles Bean
said in BBC Radio Four interview.

In the interview, Bean highlighted the risks posed by the turmoil
in the euro area, but said one bright spot was real household income
growth in the UK should improve next year, allowing consumers to spend a
little more.

He made it clear that policy is far more likely to change in
February than January, although some analysts have been predicting a
January surprise.

Asked about the possibility of a Eurozone break up, Bean said it
was cleary a possibility, but it would be highly problematic and the BOE
stood ready to provide loans to domestic banks if they ran into trouble.

“Countries may eventually feel that they are better off outside the
Eurozone than in it” but he added “It is not easy for a country to
leave, it is quite a disruptive thing if Greece, say, were to decide to
leave.”

He noted the risks posed by currency flight if any country leaves
the euro and said the BOE was doing contingency planning on a euro area
break-up.

“You would expect us to plan for the worst … If there are serious
storms coming from across the channel that we have to cope with there
are a number of things that we can do,” he said.

He said a Eurozone break up would impact the UK economy by hitting
exports “but the more important linkages are probably through the
banking system.”

While UK banks do not have high exposure to the Eurozone periphery
they do have high exposures to French and German banks.

In the event of a Eurozone break-up “We would provide temporary
loans to banks which are in difficulty. We have various facilities – we
introduced a new one just a couple of weeks ago as a precaution,” Bean
said.

He added that the BOE could also do more QE if needed, and he made
clear policy was more likely to change in February, when the current
round of Stg75 billion of asset purchases will have come to an end.

Bean noted that QE is a drawn out process, with the first round of
Stg200 billion of asset purchasing being completed over nine months. The
first Stg75 billion tranche of the second round, launched in October,
will take until late January/early February to complete.

“At the February meeting we can take stock. It is the meeting when
we have our regular quarterly forecasts so they help provide a context
and if we feel that it is necessary to inject further stimulus in the
economy, to keep nominal spending growing and to prevent inflation
falling too low two or three years out then we will certainly be willing
to do more,” Bean said.

In other comments he belittled the rating agencies, saying that
their rating actions were not that important and often amounted to them
simply catching up with reality.

He argued that the comments from the European Central Bank’s
Christian Noyer, suggesting the UK rather than France should face a
downgrade, were misconstrued as Noyer was attacking the rating agencies
rather than the UK.

–London bureau: +4420 7862 7491; email: drobinson@marketnews.com

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