Dale says UK cuts to the budget will not derail recovery as inflation BOE Monitors

Bank of England chief economist Spencer Dale said the government's budget tightening will not "derail" the economic recovery and the central bank remains as determined as ever to tackle inflation.

"The direct impact of this reduction in spending is" unlikely to derail the recovery, "Dale said in a speech released in London yesterday afternoon. While it is "undoubtedly slowing the growth," the "substantial stimulus of monetary policy and the lowest level of sterling should ensure that the recovery continues."

The Bank of England kept its key interest rate at a record low of 0.5 percent in November, officials from the division in politics as inflation remained above the government's limit of 3 percent. fiscal control agency of the Treasury said on 29 November that the British economy faces a "slow" perspectives.

"The current approach to monetary policy is to provide the necessary stimulus to support recovery and therefore the degree of slack in the economy is gradually reduced," said Dale. "That is essential if we are to achieve the inflation target" of 2 percent "in the medium term."

He said oil prices and increased sales of value added to cost pressures and policy approach is based on a statement that they do not feed through to inflation in the medium term.

"The Monetary Policy Committee remains as pure and hard as ever in their determination to achieve the inflation target," said Dale. "The responsibility is on us to explain why, given the persistence of inflation above the target, there are tightening."

While policy makers in the UK Andrew Sentance has asked the central bank will "gradually" raise interest rates, his colleague Adam Posen says more stimulus needed to help offset the impact of government budget compression .

King Controversy

Mervyn King, has supported the government's fiscal plans in the comments that Posen has been criticized as too political. He said that on 25 November that he was "uncomfortable" with the Bank's support for the plans of Prime Minister, David Cameron, the deficit reduction. The former central bank official David Blanchflower yesterday asked King to quit after further controversy when Wikileaks published a cable from U.S. Ambassador Governor citing concerns that Cameron had no experience.

Dale also said that if it is too early to say that the UK is "out of danger," he takes "encouragement" of the composition of growth in the UK, citing the improvement in domestic spending. He said the pound would drop support recovery and that has helped halt the decline of the United Kingdom's share of world exports.

However, sales of services abroad have fallen, partly due to the financial crisis and prospects for net trade will depend on a recovery in global demand, said Dale.

Support

"The expenditure of households and businesses have started to collect," said Dale. "In the coming years, the economy is likely to grow at rates around or slightly above its historical average, with the support of monetary policy" and the pound.

King said Nov. 25 that policy makers view the risks of inflation as "broadly balanced" and are ready to act when necessary. growth of consumer prices accelerated to 3.2 percent in October.

"This policy uncomfortable juxtaposition of high inflation and release has led some people to put two and two together and make five," said Dale. "The MPC has gone soft on inflation, they say. It has taken the eye off the ball. I understand why some people think this. But simply not true."

However, he said that there is a risk that the bank's strategy could cause businesses and families to "doubt the ability of PSM" and raise wages. In this scenario, the bank "would be forced to tighten policy, potentially aggressive," said Dale.

For the moment, "it seems clear that there is some degree of spare capacity and it is likely that moisture inflationary pressures," said Dale. "We need to see a sustained period of strong growth in the economy to function normally again."