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UK to set out plans to rely less on BOE for growth

Thursday, October 6, 2016 - 16:52
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Finance minister Philip Hammond will set out next month how Britain will try to rely less on ultra-low interest rates that have hurt savers, and focus more on other ways to boost growth, an adviser to Prime Minister Theresa May said.

[LONDON] Finance minister Philip Hammond will set out next month how Britain will try to rely less on ultra-low interest rates that have hurt savers, and focus more on other ways to boost growth, an adviser to Prime Minister Theresa May said.

In a speech on Wednesday, Mrs May said there had been bad side-effects from the Bank of England's emergency measures to protect the economy since the financial crisis and the time had come for a new approach to spurring growth.

The head of her policy unit, George Freeman, said the government had to "listen to the roar that we heard this year", when voters decided by a narrow majority that Britain should leave the European Union in what was seen as a protest over living standards.

Mr Freeman said the BOE - which in August cut interest rates to a record low and launched a new round of bond buying - would remain free to decide its policy, echoing comments made by Mrs May's aides after her speech.

"It's up to the BOE obviously to set out with their mandate how they handle that," Mr Freeman told BBC television in an interview broadcast late on Wednesday.

"But she (May) is signalling loud and clear that we need to make sure that we understand what effect that this model of growth has had on those who are paying for it, the citizens of this country, and to use every lever that we have to make sure that the economy works for them."

He said near-zero borrowing costs for the government offered an opportunity to increase public investment.

"We have to think about, with money available at nought per cent (how to) ... drive an industrial strategy, get infrastructure built. We need to make sure we are looking at all the mechanisms to making sure that money flows properly," Mr Freeman told the BBC.

Mr Hammond is due to deliver his first budget speech on Nov 23.

He has suggested that he favours "modest" infrastructure projects as a way to help Britain's economy cope with the impact of the Brexit vote.

BOE Governor Mark Carney has previously said that ultra-low interest rates, while tough for savers, had helped the economy avoid a deeper downturn after the global financial crisis which would have caused more pain for Britain as a whole.

REUTERS

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