–Adds Detail To Version Transmitted At 1045 GMT

LONDON (MNI) – The key concern for the Bank of England’s Monetary
Policy Committee is that UK growth is running below trend and the
question of whether the country goes into a technical recession is just
a side issue, according to MPC member Ben Broadbent.

In a CNBC interview Broadbent said there was a 50/50 chance growth
would be below zero in Q4, with the BOE’s central forecast for a flat
quarterly outturn. He was dismissive of talk of a technical recession,
that is two consecutive quarters of negative growth, saying what
mattered was whether growth was above or below trend.

Asked if the UK could slip back into recession Broadbent said
“There is a risk of that. The central forecast is around zero for Q4 so
the chances of it being negative in that quarter are roughly one half.”

“The truth is I am not sure it matters much whether it is strictly
minus a little bit or plus a bit. The more material point, as far as we
are concerned, is that growth is weaker than its trend rate and that,
therefore, the degree of spare capacity in the economy is likely to
grow,” he added.

The BOE’s numerical forecasts underpinning its November Inflation
Report showed quarterly growth in Q4 set to come in at -0.01%,
effectively flat, and for Q1 growth to stand at 0.02%, with 0.9% growth
for 2012 as a whole.

Broadbent was cagey when asked about the chances of more QE by
CNBC, saying the November MPC minutes showed some members believed it
was likely given the central bank’s forecast “but there is no commitment
in any single month to do anything beyond the decision taken in that
month.”

The MPC member supported the view that banks should strengthen
their capital base, saying “if we learned nothing else from the
financial crisis, it was that the banking system here and elsewhere in
2007/2008 … was undercapitalised.”

He said it was quite right that the global regulatory drive was to
force banks to raise capital levels.

Broadbent was asked whether the MPC was comfortable with the record
low levels on gilt yields and he said what mattered was not the yields
but the implied inflation expectations in the gilt market.

The fall in gilt yields was “largely because of what is going on in
the Eurozone. As far as the MPC is concerned … what ultimately matters
is not so much the real yield for gilts … but the inflation
expectations built into the yield curve,” he said.

Broadbent said he was reassured that during the past two or three
years market inflation expectations had “remained pretty steady”.

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

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