However, Mr Miles, regarded as the committee’s most dovish member, offered no support for politicians and economists who insist that a loosening of the government’s austerity measures is necessary for recovery. The UK’s economic performance has been significantly worse than the MPC forecast and official data have shown it slipping back into a shallow recession.
When asked whether public spending cuts to reduce the budget deficit were to blame, Mr Miles said: “I can’t see any reason for thinking that.”
Instead, he attributed the feeble performance of the economy initially to higher than expected commodity prices, which pushed up inflation and eroded household incomes.
More recently, he added: “A pretty substantial increase in the costs of funding for most UK banks then got passed through in the form of some increases in the costs of lending to corporates, and pretty clearly some increase in the costs of mortgages. That has been pretty unhelpful.”
Emergency liquidity operations instigated by the central bank last week, providing cheap six month money for banks, were likely to help the operation of monetary policy, because they would remove banks’ fear that they needed to build huge piles of very liquid assets rather than lend, Mr Miles said.
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