BoE's Broadbent says UK growth may slacken

LONDON (Reuters) – A Bank of England policymaker defended the central bank’s decision to tie interest rates to the labour market, saying the outlook for growth and productivity were particularly uncertain despite a recent pick-up in Britain’s economic recovery.

Ben Broadbent, one of nine members of the Monetary Policy Committee, said in a speech on Monday that the surprisingly strong acceleration in growth may settle down soon.

“The economy is growing. It’s hard to say exactly how fast it’s growing,” Broadbent said in a speech to be delivered to the London Business School.

Data so far for the third quarter had been strong and surveys suggested the private sector is growing at an annualised rate of about 5 percent, he said.

But he warned that might prove an over-estimate and he cautioned that the recovery might not keep up its current pace.

“Forecasters generally anticipate only around a third of changes in economic growth one year ahead, and we can be no more confident that the recovery can continue smoothly at this rate than in the view that it would never arrive,” he said.

The BoE is seeking to nurture Britain’s economy back to health, and said in August that it would not consider raising interest rates from their record low 0.5 percent until unemployment fell to 7 percent, unless inflation threatens to pick up strongly.

Financial markets have challenged the BoE’s view that unemployment will take more than three years to fall to that level from the 7.7 percent at which it stood in the three months to July.

Broadbent said he was happy with the forecast but stressed that the BoE’s guidance did not represent an unconditional promise to keep rates unchanged for a fixed period of time.

“If unemployment falls faster than we’re expecting either because productivity does less well … or because demand grows more strongly, it would be right to ask whether we should think about withdrawing some of the monetary stimulus currently in place,” he said.

(Reporting by William Schomberg; Editing by Toby Chopra)

BoE's Broadbent says UK growth may slacken