–Adds Detail To Version Transmitted At 0859 GMT

LONDON (MNI) – Developments overseas are key for the setting of UK
monetary policy and for what happens to the domestic economy, Bank of
England Chief Economist Spencer Dale says in a Reuters interview
published Wednesday.

In the interview Dale highlights how BOE policymakers are at the
mercy of events overseas and how they unfold will determine what happens
here.

“The main reason why our economic outlook has deteriorated very
substantially over the past few months is what’s happening in the rest
of the world and, therefore, how we will set the stance of policy going
forward,” Dale says.

Dale has been of the most hawkish members of the BOE’s Monetary
Policy Committee.

He voted for a 25-basis-point rate hike at every meeting between
February and July this year. The minutes of the October MPC meeting, at
which the committee sanctioned stg75 billion of quantitative easing, are
out on Oct 19.

In the interview Dale argues that QE will work the second time
around, with the gilt buying encouraging investors to diversify into
higher return assets.

He stressed that QE works by going round the banking system, and it
is wrong to argue QE will be undermined because the banks will simply
sit on the money.

Dale has repeatedly expressed concerns that high inflation outturns
will feed through into elevated inflation expectations and could
influence wage or price setting.

In the interview he says inflation is likely to have risen to above
5% in September, more than three full percentage points above the MPC’s
target, but it is likely to fall sharply early next year and Dale said
economic weakness has added to downward pressures.

There is no comment in the interview that makes it crystal clear
how Dale voted at the October meeting, although his comments on the
economic outlook echo the views expressed by the MPC in the statement
issued at the end of the October meeting to justify the relaunch of QE.

Asked if he voted for more QE Dale said his decision would not be
known until the minutes adding he was “speaking … as chief economist
of the Bank, explaining the reasons why the Committee made the decision
it did.”

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

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