Bank of England's policymaker sees recovery at end of 2009

The British economy will probably recover at the end of 2009 but the risks are weighted to the downside and policymakers may thus need to take more action, Bank of England policymaker Spencer Dale said today.

"As we go through 2009, I believe that it is most likely the pace at which output is contracting will ease and that we will see some signs of recovery by around the turn of this year," the BoE's chief economist said in a speech.

Dale's outlook was consistent with the latest edition of the Bank of England's quarterly Inflation Report, which was published in February, though he said more action may be needed to ensure recovery by the end of the year.

"I think the risks around this central path are weighted to the downside, reflecting the possibility that the actions taken by the authorities around the world ... are slow to take effect. So there may still be more to do."

Dale said the immediate economic outlook was gloomy, though recovery was likely later.

"Although immediate prospects appear bleak, the substantial economic stimulus that is underway means that there are grounds for thinking that economic conditions may start to improve later this year," he said.

Once recovery set in, the Bank would be as quick to tighten policy as it had been to tighten it. "When the time comes, we will be prepared to respond with equal vigour on the way back up," he said.

Meanwhile there were promising early signs from the Bank of England's asset purchase schemes, the cornerstone of its quantitative easing policy, though it was too early to be sure, Dale said.

The Bank of England would review each month the scale of the asset purchase scheme, currently set at £75 billion over three months, he added.