Bean says QE door shouldn’t be closed for BOE officials
Bank of England Deputy Governor Charlie Bean said business confidence remains vulnerable and officials should keep open the option to expand stimulus even if its potency is currently diminished.
“Certainly we haven’t closed the door forever on further asset purchases and it would be incorrect to say that we’ve decided they’re ineffective at the current juncture,” Bean said in an interview. “The bang for buck might be a bit less now than it was in 2009. That doesn’t mean to say that you don’t want to do any more of it, it just means that to get the same effect, actually you have to do even more than before.”
Bean spoke while returning by train to London after a two- day visit touring businesses and gauging confidence among executives around central England. He said that the British economy is probably growing “weakly at best” and one-off factors mean it might contract in the current quarter, threatening to hurt sentiment. “Particularly if the press choose to portray it as ‘Britain back in recession,’ that clearly may end up having some adverse effects on business confidence,” Bean said. “All we can do is keep trying to restate this message that there will be this temporary factor depressing growth in the fourth quarter and hope that that gets across.”
There should be fewer distortions in the first three months of 2013 and that will help provide a “a cleaner read” on the economy’s underlying growth, he said.
Bean, 59, spoke a day after the U.K. government announced the appointment of Mark Carney as Mervyn King’s successor as Bank of England governor. The deputy governor will extend his term for a year to assist with the transition. He said the euro area still remains the “biggest downside risk” to the U.K as “there is always the risk of disorderly unraveling.”
“This uncertainty associated with the euro zone I think has helped to make businesses that bit more cautious about investing in the U. K. at the moment,” he said. “There’s nothing that we can directly do to affect events outside our shores, whether it’s the euro zone, oil prices or whatever,” Bean said. “All we can do is respond to them when they actually happen.”