Bean lays out bullish view of economy

THe economy could grow by more than previously expected this year as the strengthened banking sector helps the recovery gain traction, according to Bank of england deputy governor Charlie Bean.

Bean, who is involved in monetary policy, told a gathering of economists that gross domestic product (GDP) could grow by almost 2 per cent in the second half of 2013 alone. He said: “There are at last signs that a recovery may be gaining traction.”

Bean said that was due to two factors – the eurozone has “moved out of its existential crisis” and UK banks “have made considerable progress in bolstering their capital positions [and] are now well-placed to provide the credit necessary to support recovery”.

Nevertheless, Bean expects growth to be modest over the next few years, as some households are still burdened with high debts and the UK government still needs to rein in its own spending.

And the deputy governor played down inflation fears and said the bank is likely to keep interest rates at their current low until unemployment reaches 7 per cent.

It may even then decide to set a lower target figure for unemployment before raising rates, provided inflation is back around the 2 per cent level, he added.

Bean’s speech came as the Bank of england hired external consultants to review its resources and priorities, pressing on with a modernisation drive under governor Mark Carney. McKinsey will advise on a strategic review, while Deloitte will advise on potential cost savings.