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Bank Stability Chief Warns On 'uncertain' Outlook

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The UK's economic outlook is still "highly uncertain" despite tentative signs that the recession might be coming to an end, according to Paul Tucker, the Bank of England's Deputy Governor for Financial Stability.

Speaking at a conference of the Association of British Insurers today, Mr Tucker, who is a a member of the Bank of England's Monetary Policy Committee, will say that it remains unclear whether banks would begin lending enough to support a recovery.

He will urge banks not to cut back on credit, arguing that "not lending would be a counterproductive business and financial strategy". His comments will represent a challenge to the Treasury's forecast that the economy will come out of recession later this year and begin growing next year.

"For the moment it is unclear — as I must say, it is bound to be at this stage — whether the financial system can generate the expansion of credit that will be likely to be necessary to support recovery," he will say.

The Bank has embarked on a huge programme of "quantitative easing", effectively releasing new money into the economy in the hope that banks will pass on credit to individuals and business customers.

In extracts from Mr Tucker's contribution to a "state of the market" panel to be held later today, Mr Tucker notes that the market is confident that the Bank's rate-setting committee is prepared to raise interest rates from the historical low of 0.5 per cent if the outlook for inflation suggests that is necessary.

In wide ranging comments, Mr Tucker welcomes the insurance industry's recent code of conduct for trade-credit insurance, amid worries that insurers refusal to cover suppliers has pushed some retailers to the brink of collapse.

Of course lending to loss making companies is very productive for the balance sheet.

The bank clearly needs to print more money to solve the lending problems and everything will be fixed.

If more people take on debt all our troubles will go away.

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Sibley says everything is alright though so what's his problem? :D

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