Breaking News: Policy will take time to benefit economy, says Bank of England chief

BANK of England deputy governor Charles Bean has said that the effects of quantitative easing on the economy are unlikely to be seen for at least nine months.

Speaking to an audience of Yorkshire business people, the economist said that the impact of changes in UK interest rates took nine months to make an impact on the economy and the Bank believes that its current policy of quantitative easing (QE) – to put more money into the economy to boost spending – will take at least as long.

Speaking at a Bank of England seminar before an audience of 150 people at the Crowne Plaza Hotel in Leeds at lunchtime, Mr Bean said: “When we change bank rate we expect it to take nine months to work through. The quantative easing effects are likley to take that long or even longer.

“But we are monitoring it to see whether we do more. Things are looking at least as if they are heading in the right direction. The aim is to get money spending growth back to a level consistent with trend growth and 2% inflation.”

The deputy governor said that the Bank of England is likely to raise interest rates as a measure to put the brake on QE as the “recovery proceeds”.

“We are going to need to withdraw the stimulus and we have two ways of doing that. We can raise the bank rate first and unwind asset purchases later.

“But we don’t want to do it too early and nip the recovery in the bud. We will look at conditions one month at a time and try to form our best opinion,” he added.

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