BOE Fisher: We Have To Keep Open Mind On Further QE

–Says It’s Possible That This Will Be The End For Now
–Downside Risks Seen In October Don’t Seem To Be Crsytallising
–If That Trend Continues – Will Add To Arguments For Stopping QE
–Comments From Sky TV Interview

LONDON (MNI) – The risk of the UK economy slipping back into
recession does not seem to be materialising at the moment and – if that
trend continues – the case for stopping asset purchases will be
strengthened, Bank of England Executive Director Markets Paul Fisher has
said.

In an interview with Sky TV, Fisher said that it was important to
maintain an ‘open mind’ on the case for doing further QE:

“I think we have to keep an open mind, certainly I’ve got an open
mind. It’s possible that this will be the end for now, we will decide
that over the next few months,” Fisher said.

Fisher noted that the BOE’s Monetary Policy Committee tended to
make its mind up on QE every three months – “so that there’s some
certainty in the markets about what we are likely to do.”

“So the most likely thing is that we wait until May, when we do
our next forecasting round and make a decision then, although we will
reflect on it all the time since,” he said.

If the economy continued to defy recession risks, the case would be
stronger for stopping QE, he said.

“For me the big question marks in October was the risk of the
economy slipping back into another recession we could see the economy
weakening during the course of last year and we had quite negative
growth in the fourth quarter,” Fisher said.

He continued, “For the moment, that downside risk does not seem to
be crystallising, we don’t seem to be continuing to slide down into
negative growth. If that’s what it looks like over the next few months
that will put more weight on the arguments for stopping rather than for
carrying on.”

Fisher said that QE was having some “quite powerful” and benign
effects in terms of lowering interest rates and easing corporate access
to credit, but these effects were “not very direct”.

Pressed on when the MPC might start tightening policy, Fisher
replied that if the committee started to see “fundamental inflation
pressures pushing up, then we will think about tightening”, but he
noted that market expectations were presently for unchanged rates for
the next two years.

–Contact: Tel: 44-20-7862 7492; or e-mail: dthomas@marketnews.com.

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