GO
Loading...

UK Looking Good in 'New Normal': Ex-BoE Official

Jason Alden | Bloomberg via Getty Images

Andrew Sentance, a former member of the Bank of England's monetary policy committee, has told CNBC that the U.K. economy has improved in recent months and he doesn't expect more stimulus from the central bank at Thursday's meeting.

"The fact is that actually we've had some better economic data for the U.K., even though GDP is 0.3 percent. Before the financial crisis we would see that as disappointing," Sentance told CNBC Thursday. "We are now in a new normal of growth where you know that's not too bad, that's OK. We've seen business surveys and other indicators showing that the economy is growing quite slowly."

(Read More: 'Herd Behavior' Makes BoE Action a Closer Call)

"What is interesting is that it's the services sector that is pulling the U.K. economy forward, not the rebalancing towards manufacturing that the bank and the government has talked about. It's a U.K. economy that is perhaps returning to some of its traditional strengths, we are quite a service oriented economy and that's helping on the employment front as well."

Service sector growth figures last week added to signs that the U.K. economy may be gaining some traction. The Markit/CIPS services Purchasing Managers' Index rose to 52.9 in April, above expectations and its highest reading since August 2012.

The Bank of England said at its last meeting that it would not add to the 375 billion pounds ($582 billion) of government bonds it purchased from March 2009 to October 2012, and that it would keep interest rates unchanged at a record low 0.5 percent.

(Read More: Despite Uptick, UK Austerity Isn't Working)

At each of the last three policy meetings, members have voted 6-3 to keep policy unchanged. But the three dissenting voices, including Mervyn King - the BoE's outgoing governor – have voted to increase quantitative easing by an extra 25 billion pounds.

The lack of action by the Bank of England to expand monetary policy, comes at a time when other central banks aren't sitting back. The European Central Bank and the Reserve Bank of Australia have both cut interest rates by a quarter point in the last week on growth concerns, while the Bank of Japan has pledged to double its government bond holdings in two years.

(Read More: UK Service Sector Growth More Than Expected)

The Bank of England's latest interest rate decision is due Thursday at 12 noon London time.

By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81.

Contact Europe: Economy

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More