BoE Deputy Claims Economy Set for Moderate Recovery

Bank of England (BoE) deputy governor Charles Bean has said that the economy appears to be set for a moderate recovery, starting later this year.

It is expected that a fall in inflation will ease the pressure on household incomes and result in a moderate pickup in household spending – with strong retail sales in January possibly being the first sign that this will occur.

However, while Bean believes that the latest bailout deal for Greece is welcome, the euro zone debt crisis remains the biggest risk to the UK economy, and will stifle the speed of growth in the early part of the year.

“Despite the more encouraging signs, we continue to expect underlying growth to remain sluggish in the first half of the year,” Bean said. “But while growth should gradually strengthen, the continuing headwinds from the unwinding of excessive debt and the government’s continuing fiscal consolidation mean that the pace of recovery is likely to remain moderate by historical standards.”

According to Bean, the Bank’s decision to pump £50bn into the economy in early-February, as part of its quantitative easing programme of asset purchases, was correct, and that without this injection inflation would have been likely to stay below the Bank’s target of 2% in the medium-term.

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