Bank says worst over for Britain
BRITAIN has seen the worst of the recession and it is now unlikely that earlier fears of a deeper slump will materialise, Bank of England deputy governor Charles Bean said yesterday.
In a speech to accountants, Bean said that there had been fears earlier this year that the recession would continue to deepen but that “it now seems that activity here and elsewhere has probably troughed”.
He pointed out that recent data on gilt yields and bonds has shown that quantitative easing (QE) is having the expected effect on the economy. He also added that the ultimate aim of the policy is to get the annual rate of growth of nominal spending in the economy back to the five per cent, which it averaged until the crisis.
However, it would be some time until the Bank knows how effective the policy has been in achieving this objective of QE, Bean said.
Bean indicated that the Monetary Policy Committee (MPC) would look to gradually remove the large monetary stimulus to avoid overshooting the inflation target of two per cent.
“That monetary tightening will take the form of some combination of a higher level of Bank Rate and asset sales from the Asset Purchase Facility (APF) to the private sector,” he said. By selling off the gilts, yields should be pushed back up towards where they would have been in the absence of QE.