BOE Policy Should Help Steady UK Economy - Report
First Published Friday, 4th May 2012 07:20 am - © 2012 Dow Jones
LONDON -(Dow Jones)- The current ultra-stimulatory monetary policy should help to boost the economy after helping keep employment, activity and asset prices all higher than they would otherwise have been, Bank of England Deputy Governor Charlie Bean said Friday.
And, the Financial Policy Committee which will be fully functional in 2013 will offer much needed additional tools to help keep the U.K. economy from collapsing so spectacularly again.
Writing in U.K. newspaper the Financial Times, Bean said that after being given full responsibility for monetary policy 15 years ago, 10 years of stability followed for the central bank. The five years that came next, however, were tougher than could have been expected and have made it clear that having one target--the inflation rate--is not enough to keep the economy from falling so sharply.
The answer is not to "jettison the inflation target and direct monetary policy at other ends," Bean said. "The application of regulatory tools of the sort being considered by the Bank's new Financial Policy Committee could offer a more effective way to increase economic resilience."
He adds that the Monetary Policy Committee and the FPC may have to work together in the future, and continue to accept "temporary deviations of inflation from target".
And, while many consumers are unhappy with the long period of low savings returns, which comes as a direct result of low interest rates and the ongoing program of quantitative easing, they continue to benefit indirectly from the central bank's policies.
"Part of the problem is that people can see the direct impact on them of policy, but are less conscious of the indirect effects," Bean said, adding that higher employment and activity are the indirect effects of the Bank's stance and are benefiting the whole economy, and should continue to do so.
"Most importantly, the highly stimulatory monetary stance should help put the economy back on an even keel. That is the best medicine of all," Bean said.
-By Ilona Billington, Dow Jones Newswires, +44 20 7842 9452;