While he has publicly expressed doubts about the Bank of England's policy of quantitative easing – the injection of £200bn into the economy – and voted, in a minority of one, against the last extension of the programme, the Bank's chief economist Spencer Dale yesterday delivered an upbeat assessment of QE's success. "[The economy] appears to have turned," Mr Dale said.
"We are likely to be moving into a period of renewed expansion. There is a range of evidence from business surveys, from the Bank's regional agents, and from recent indicators that the economy has begun to stabilise and that we are likely to be moving into a period of renewed expansion." However, he warned that "the recovery in the level of economic activity is likely to be relatively slow".
Though more "on message" than in the recent past, Mr Dale did voice his concerns about the possibility that asset prices might get out of control and prove costly to rein back in.
He said: "The current stance of monetary policy, in which Bank rate is very low and substantial amounts of liquidity are being injected into the economy, increases the likelihood that asset prices may move out of line with their fundamental values and that this could be costly to rectify were it to occur. It is a risk that we need to be alert to... Given the uncertainties about the behaviour of inflation as this spare capacity is being closed, my preference was to aim to grow the economy a little less rapidly."
Some economists have warned that imported inflation from the devalued pound and soaring commodity prices threatens to unleash higher inflationary expectations and actual inflation next year.
Mr Dale admitted QE had "not been of as much help to many small- and medium-sized enterprises" but insisted that even they had benefited indirectly from the accompanying fall in Libor rates.Reuse content