Bank of England policy maker Ben Broadbent said there are more reasons to be optimistic about the economy while acknowledging that there may be revisions to last week’s better-than-forecast economic data.
“If you ask me are there signs other than just our forecast that the economy is going to grow over the next six months, I’d say yes, and there are probably more of those signs than in the middle of last year,” Broadbent told reporters in London today. Still, the BOE’s last forecasts in February are “still a lot weaker than a normal recovery and weaker than even the average,” he said.
Broadbent voted with the majority of the Monetary Policy Committee last month when it kept its stimulus program on hold. While data last week showed that gross domestic product rose 0.3 percent in the first quarter and the economy avoided a triple- dip recession, Broadbent said the result on its own doesn’t have much significance as the figures may get revised.
“These things get revised all over the place,” he said. “We don’t know how persistent it is. It’s better up than down, but given the margin of error in these things, I don’t think it has that much significance.”
Broadbent, an external member of the MPC who previously worked as an economist at Goldman Sachs Group Inc., said the recent decline in commodity prices was “welcome,” and that the pound’s weakness hasn’t “materially” altered his inflation outlook. Inflation was at 2.8 percent in March, above the BOE’s 2 percent target.
Broadbent also joined the growing number of MPC members who have downplayed the potential benefits of forward guidance. The policy is favored by Bank of Canada Governor Mark Carney, who will take over from Mervyn King at the BOE in July.
While the measure may have an impact, the current U.K. yield curve “is so flat, I’m not clear how much it would buy,” Broadbent said. King said last month he would be a “little bit cautious” about the policy.
Broadbent made the comments after delivering a speech on forecasting errors by the MPC in the wake of the financial crisis at the Mile End Group, a forum hosted by Queen Mary, University of London.
The MPC will hold its next policy meeting on May 8-9, when it will have new projections for economic growth and inflation. (UKRPCJYR) Since its last decision, the central bank and the U.K. Treasury have expanded their Funding for Lending Scheme to boost credit to smaller companies.
Broadbent said that the FLS extension “was a good idea” and that the impact of the overall program has been “quite encouraging” so far. He said it was too early to tell what the full impact of the plan will be.
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