Europe Economy

Double Dip Unlikely Despite 'Some Risks': BOE's Sentance

The Bank of England is not expecting a double dip recession for the global economy despite some risk signals, policy maker Andrew Sentance told CNBC in an interview recorded Thursday.

Sharon Lorimer

"I have to recognize that there is some risk of a double dip recession but it is not the central forecast," Sentence said. "We would have to see some factors that would bring that about."

The pound dipped versus the dollar and the euro after his comments.

"It (sterling) has had a fantastic week really," Sam Stanley, dealing director at Halo Financial, told CNBC Friday. "I think the Andrew Sentance story … that was used as an excuse to sell sterling as a profit taking ahead of the weekend."

Sentence said the key to a recovery is consumer confidence.

"The way in which recoveries normally develop as they continue -- confidence begins to build between consumers and firms and that reinforces the recovery. That is the normal pattern."

"Personally I've been relatively encouraged by the turnaround we've seen both in the UK and in the global economy," Sentance said.

The UK government injected a hefty economic stimulus package, worth $47 billion,  in late 2008 to reignite consumer spending and help Britain recover from a deep recession.

While the policy has proven sucessful so far, Sentance said a slow tightening will need to happen in Britain, and globally, to return budgets to a more sustainable level.

He also cautioned about new shocks on the international front that could derail the recovery.

"Now we have seen big shocks in the international economy in the past couple of years so you couldn't rule out some new shocks emerging on the international front that could set back recovery. But that is not my central expectation. The more normal pattern is to see the recovery building gradually as we go into this year into next year," said Sentance.

Prolonged Fiscal Tightening Will Stabilize UK Deficit: Sentance

Inflation, which was 3.5 percent in January and above the central bank's target of 2 percent, was fueled partly by the depreciation of the pound, "which has been very significant," and partly by energy prices, according to Sentance.

But the MPC's message was that "inflation is coming back towards the target," he added, saying that the effect of muted pressures on wages because of the recession is likely to help keep price rises in check.

- Watch the full interview with Andrew Sentance above.

The Bank of England voted unanimously this month to leave interest rates at 0.5 percent -- where they have been since March 2009 -- and to maintain its stock of asset purchases under quantitative easing at 200 billion pounds. 

Some economists expect the BoE to begin raising interest rates before late this year.