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Business Bank Of England Uk's Summer Bounce Could Be 'self-Confirming' Upswing – Mpc Member

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More bluff on forward guidance

UK's summer bounce could be 'self-confirming' upswing – MPC member

Bank of England policymaker David Miles says forward guidance on interest rates should help nurture economic recovery

David Miles consistently voted for an extension of the Bank’s £375bn QE programme from November 2012 until Carney’s arrival in July

The summer bounce in Britain's economy could mark the start of a "self-confirming" upswing, according to Bank of England policymaker David Miles, who used a speech on Tuesday to defend Threadneedle Street's policy of forward guidance.

Speaking at Northumbria University in Newcastle, Miles, who sits on the Bank's nine-member monetary policy committee, said he believed its promise to keep interest rates low until the recovery is well entrenched could help nurture the nascent upturn.

"The reason I think guidance is helpful now is that it reduces the risk that a recovery that is still somewhat embryonic is not smothered by the anticipation that a tightening in monetary policy is imminent," he said.

The MPC has pledged to postpone increasing interest rates until unemployment falls below 7%, provided inflation remains under control.

City analysts have been sceptical about the policy, introduced by the new Bank governor, Mark Carney. Long-term interest rates, set by investors in financial markets, have risen since it was first announced in August, amid a slew of upbeat data about house prices, retail spending and business confidence.

But Miles echoed Carney's insistence that the move upwards in borrowing costs had been a "benign tightening", because it reflected growing confidence in the strength of the economy.

Miles, who consistently voted for an extension of the Bank's £375bn programme of quantitative easing from November 2012 until Carney's arrival in July, said he was more optimistic about the state of the economy than at any time since he joined the committee in 2009: "It is likely that the rate of the growth of the economy right now is at – and quite possibly above – the average rate in the 50 years up to the onset of the financial crisis that started in 2007." That would point to a healthy annual growth rate of 2.8%.

However, Miles stressed that while growth is strong, the level of output in the economy remains well below where it was before the crisis, so that it is unlikely to spark a surge in inflation.

"It would be spectacularly misguided to think that some signs of more normal growth mean that the economy is back to normal; and it would be equally misguided to think that if growth were to be near trend, monetary policy should be quickly returned to a more normal setting."

He said it was "plausible" that the economy could expand at the current relatively strong rate, or even faster, for up to two years, without bringing unemployment down to the 7% threshold, which he described as a "signpost".

He also stressed the role of improved confidence, among both consumers and firms, in cementing the recovery, and allowing Britain to escape the low growth, low productivity slump of the past couple of years, on to a new trajectory, with optimism about future demand helping to boost spending and growth.

"What a potentially self-confirming and stronger path for output and confidence does not need right now is tighter monetary policy. That is what the guidance that has been given by the MPC is designed to avoid.

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Summer bounce?

Would that be the quiet season when everyone's on holiday and volumes are lowest?

Meaningless ramping ahead of the Autumn buying season!

Meaningless ramping ahead of the Autumn buying selling season! ;)

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signs of normal growth dont mean there is normal growth.

a wasted two minutes reading this bankers bullshite

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