The UK economy needs at least another £50 billion of fiscal stimulus to aid its recovery, a Bank of England policymaker has warned.
David Miles, who sits on the nine-member monetary policy committee (MPC), said the economy needed a “substantial” third round of quantitative easing (QE).
He voted for extra QE at this month’s MPC meeting, along with three other members including Bank governor Sir Mervyn King.
Mr Miles said in an interview for the Financial Times: “Do we need a more expansionary monetary policy? ‘Yes’. Should it be a substantial change in asset purchases? ‘Yes’. Is £50bn a substantial number? ‘Yes it is’. Could one know in advance what is exactly the right amount to do? ‘Absolutely not’.”
However, he claimed that he saw no reason for thinking that the Government’s austerity measures, aimed at reducing the budget deficit, were impeding recovery, and instead suggested that rising commodity prices had hit the economy by driving up inflation.
Mr Miles 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.”
A third revision of first quarter GDP, due to be released this week, is expected to confirm that the UK is in a double-dip recession.