Bank of England Markets Director Paul Fisher said expanding monetary stimulus by 75 billion pounds ($120 billion) this month was the minimum amount needed to shore up an economy that may already be shrinking.
“There was sufficient downward momentum in the U.K. economy to justify 75 billion,” Fisher, 53, said in an interview in London yesterday, referring to the bank’s Oct. 6 decision to buy more bonds. “Even if we get a silver bullet solution to Europe, I still thought we needed to do something like that to head off the risk of a slowdown.”
Policy makers expanded their asset-purchase plan for the first time since 2009 as Europe’s debt crisis and Britain’s budget squeeze threatened growth. Fisher said there may be a “50-50” chance the economy will contract in the fourth quarter, even if euro-area officials succeed in containing the region’s turmoil. European leaders persuaded bondholders to take 50 percent losses on Greek debt after talks in Brussels that concluded early this morning.
Fisher said U.K. growth may be “not much better than flat” in the fourth quarter and there is a “significant” chance of another U.K. recession.
“Looking at the fourth quarter for example, at best it seems to be flat, could easily have negative growth, so the technical outcome of two quarters of negative growth in a row could quite easily come about,” he said in a separate Bloomberg Television interview. “But hopefully we have spotted it coming and we’ve taken action which will help prevent it.”
“I voted for 75 because I was pretty sure we’d have to do at least 75,” he said.
