Britain will have to wait for the boom times to return despite “some signs of a pick-up” in the economy, Bank of England rate-setter Paul Fisher declared yesterday.
The Bank’s markets director – one of three monetary policy committee members voting for an extra £25bn in quantitative easing to boost growth – said the UK’s weak recovery could last for another three years.
His comments come days after the International Monetary Fund warned the economy is “still a long away from a strong and sustainable recovery”. The FTSE 100 index’s surge has meanwhile fizzled out, with shares falling yesterday (see pages 60-61). “Most of the economic problems we face will be eased as growth recovers but, in my view, a return to boom conditions is unlikely in the UK any time soon,” Mr Fisher, pictured below, said.
The rate-setter said virtually every sector of the economy – households, banks, businesses and the public sector – was expecting to be worse off compared to before the financial crisis, and had hit growth by cutting spending to pay down debts, tackle pension deficits or save for deposits.
He added that the UK may be only “two thirds to three quarters” of the way through the necessary process of balance-sheet adjustment, which has seen the economy grow at trend for only six of the past 21 quarters.
“To be clear, we do not need to be 100 per cent finished before growth strengthens at all, and we may be beginning to see some signs of a pick-up. And I think this prognosis is consistent with our Inflation Report central projection of a gentle, albeit sustained, recovery over the next three years. That is a somewhat sobering, but not calamitous, outlook for real growth,” he added.
Mr Fisher said the Bank’s loose monetary policy stance “should generally be helpful to balance-sheet rebuilding” but added he was “not convinced” of the effectiveness of rate cuts below their current 0.5 per cent record low.