No green shoots but recovery is on the way, says Bean
BRITISH firms can expect continued difficulty in obtaining funding, but should be optimistic about the prospects for economic recovery, the Bank of England’s deputy governor Charles Bean said last night.
In a speech to steel industry figures in Sheffield, Bean said there were encouraging signs that business confidence was returning but said he would “hesitate to identify them as ‘green shoots’”.
He warned that it would take time for the banking system to recover, predicting that “the supply of credit will remain impaired for some while”. But despite the note of caution, Bean laid out reasons why companies should be upbeat about the likely strength of economic recovery.
He pointed to the depreciation in the value of sterling, which he said would “encourage buyers to switch to goods and services made in this country and make it more profitable to produce them”.
Bean said the Bank of England’s repeated rate cuts – with interest rates at a 315-year low of 0.5 per cent – would also help, coupled with the Bank’s programme to purchase a total of £125bn in public and private financial assets.
He lamented the “unlovely” phraseology of the term “quantitative easing”, but said the ultimate effect of the programme would be to drive up equity and bond prices.
The Bank would also have to manage its exit strategy from stimulus programmes carefully, he added, but said the central bank would not “nip a recovery in the bud prematurely”.