A top Bank of England official has warned that the UK remains vulnerable, despite the recent inflow of positive economic news.
Bank of England head of markets Paul Fisher, during a visit to meet Exeter-based firms, cautioned that he had yet to hear from a company reporting growth which was faster than the trend, despite the fact that by now the economy should be rising more rapidly than its long-run rate, the Times reports.
Fisher added that the recent market gyrations showed investors had wised up to the possibility of an end to very loose-monetary policy in the US but in the UK, the environment remained starkly different.
While yields on gilts have been sharply rising during the past month, Fisher argued that he believed that this was being “totally driven by the international scene” rather than UK-specific factors, warning that it could be a year or two before growth rises above its trend rate.
Fisher said: “At the moment the macroeconomic outlook here is not as bright as in the US, and therefore we are some way behind them in terms of return to anything like trend growth, and so the question [of exit] will come to us a bit later.”
In recent months he has been recommending a £25bn boost to the Bank’s quantitative easing programme, as part of a minority group including Sir Mervyn King, the Bank’s outgoing governor.
While there had been stronger data emerging from Britain, he added: “Personally, I will not get terribly excited until we have had a run of growth that gives us a bit more comfort that something is set in train.”
This week saw the Organisation for Economic Co-operation and Development further boost optimism that Britain’s economy is returning to steadier ground. The organisation’s leading indicator for the UK rose to 100.8 in April, a modest rise from the 100.7 notched up during both March and February, and the 100.6 recorded in January.
Significantly, the measure has steadily moved upwards since May last year and is now pointing to growth close to its trend rate. Elsewhere the UK has been enjoyed better data in regards to job numbers, house prices and service sector activity levels.