By Dow Jones Business News, March 20, 2013, 01:26:00 PM EDT
By Alex Brittain
LONDON--Britain's economic prospects may be brighter than suggested by Wednesday's lower forecasts, given the Bank of
England's new powers to promote growth.
In announcing reduced estimates of growth in coming years, the government's official forecasting body didn't take into
account changes to the BOE's remit that could make the central bank more active in stimulating the economy.
"We're not taking any particular view on whether the outlook for monetary policy is likely to be different or
unchanged because of the new [BOE] remit," Robert Chote, chairman of the Office for Budget Responsibility, said at a
Still, his comments suggest that if the BOE does take a more activist stance on promoting growth under new Governor
Mark Carney, who takes over in July, the economy could subsequently outperform the OBR's latest forecasts.
Earlier Wednesday, Chancellor of the Exchequer George Osborne gave BOE policymakers more leeway over the time they are
required to bring inflation back to the 2% target.
The BOE should also consider linking its policy stance to other economic variables, Mr. Osborne said in his annual
budget statement. That could mean targeting measures other than inflation, such as unemployment, as the U.S. Federal
Reserve has done.
The organization--whose views form the government's official forecasts--said Wednesday it expects the economy to grow
0.6% in 2013 and 1.8% in 2014. That is a downgrade from forecasts just three months ago and means the government is also
likely to have to borrow more in coming years.
While the BOE may be in a better position to help, Mr. Chote said any growth in the U.K. economy is uncertain given
the fiscal crisis in the neighboring euro zone, which flared over the weekend after Cyprus agreed to tax savings
accounts in return for an international bailout to save its banks. Lawmakers on Tuesday rejected the plan, throwing the
bailout into doubt, along with the future of the currency union.
Write to Alex Brittain at email@example.com
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