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The election of Donald Trump been positive for the UK economy, the Bank of England’s deputy governor has said, welcoming the new president’s focus on higher spending and lower taxes for global economic sentiment.
Speaking after the BoE lifted its growth forecasts for the UK, Ben Broadbent said the new White House administration had already led to improving business and financial market conditions, boosting the UK’s economic prospects “on the margin”.
A member of the UK’s rate-setting monetary policy committee, Mr Broadbent told the BBC:
The new administration’s economic plan is indeed to ease fiscal policy, spend a little more on infrastructure, maybe cut some taxes and that probably would help with global growth. We [the UK tend to follow global cycle…so it is a positive thing.
There’s a lot we have yet to see about the detailed plans, including those for fiscal policy, for government spending and taxes and so forth, so we’ll have to wait and see.
The BoE now expects the UK economy to post growth of 2 per cent this year from an earlier forecast of 1.4 per cent – its second upward revision in three months after it had predicted a shallow recession if Britain voted to leave the EU back in May.
Much of the short-term growth revision can be put down to better conditions for the global economy, including a more stimulative impact from global fiscal policy, said the BoE.
Mark Carney, BoE governor, also heralded the shift towards government policy supporting growth in the wake of the Trump election, calling time on central bankers’ “15 minutes of fame” since the financial crisis.
Amid criticism the BoE had been too pessimistic in its projections for growth after a Brexit vote, Mr Broadbent said the central bank had made no explicit forecasts conditioned on a leave vote but instead derived its projections based on what businesses and consumers were reporting in the immediate aftermath of the referendum.
“It wasn’t some prior expectation that the vote would necessarily weaken the economy and consumption dramatically”, he added.
“The only thing we said ahead of the referendum was that we weren’t sure what would happen other than we did expect to see a sharp fall in the currency”.