23/07/2014 07:04 BST | Updated 23/07/2014 07:59 BST

Bank Of England 'Saved The UK's Economic Recovery', Says BoE Economist

LONDON, ENGLAND - JUNE 12: Chancellor of the Exchequer George Osborne (R) is followed by Mark Carney, Governor of the Bank of England, as they enter the 'Lord Mayor's Dinner to the Bankers and Merchants of the City of London' at the Mansion House on June 12, 2014 in London, England. In his keynote speech the Chancellor is announcing new measures to tackle 'the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them'. (Photo by Peter Macdiarmid - WPA P

The Bank of England's prudent decisions after the financial crash helped ensure the UK's economic recovery took hold, a senior Bank economist has said.

Paul Fisher, who is now head of the Bank's Prudential Regulation Authority, credited the central bank's policies like the quantitative easing stimulus package and the Funding for Lending programme with boosting banks' lending and restoring economic growth.

"A number of our policies had very big powerful effects on the recovery phase, and, without doubt, things would have been much worse if we hadn't stuck to our guns," he told the Independent.


This comes as newly released minutes from the Bank's latest meeting of its Monetary Policy Committee in July revealed that one of its interest rate setters believed there was less risk of the UK's economic recovery being derailed by an early interest rate rise.

The Bank's minutes suggested that an early rate rise would allow officials to see how families and mortgage holders cope with the increased cost of borrowing in the change from the UK's current historic five-year low of 0.5%.

"A rise in Bank Rate at a time when the economy was growing strongly would facilitate a more gradual path thereafter and would allow the Committee to evaluate the sensitivity of households, firms and financial markets to changes in interest rates, following a long period during which Bank Rate had remained unchanged," the minutes explained.

Bank officials voted to keep interest rates at their current low, the minutes confirmed. Speculation and concern has mounted over when the Bank will start to raise interest rates as families and businesses would stand to be hit by the increased cost of borrowing.

Business leaders have urged the Bank to raise interest rates, insisting that the "time has come". James Sproule, chief economist at the Institute of Directors, said: “We remain concerned that there is insufficient appreciation that we are experiencing extraordinary monetary policy, and it should not be assumed that such extraordinary policy can continue.

“Looking ahead two years, we would like to be reaching a point where monetary policy could again be effective, which means interest rates in the range of 3-4%. The economic recovery is strong enough that the time has come to be making progress towards that medium term goal."

Some Bank officials, like chief economist Andy Haldane, argue that rate-setters should consider raising interest rates by the end of the year to remain "on the front foot".

However Lib Dem business secretary Vince Cable recently warned officials that a premature rate rise could derail the recovery.

"My immediate concern as business secretary is if these incipient inflationary pressures lead to a rise in interest rates sooner and further than is warranted by the economy as a whole, it could place in jeopardy our hopes for a sustained and balanced recovery."

See also: Mark Carney's New Mortgage Rules Hit Young People Worst, Says Bank

An interest rate rise by the Bank would help cool an overheating UK property market, which is still showing few signs of cooling as new figures showed that mortgage approvals increased for the first time in five months in June.

Some 68,121 mortgages collectively worth £10 billion got the green light last month, marking a 4% month-on-month increase in the number of approvals and the first monthly upswing seen since January, data from the British Bankers' Association (BBA) showed.

Within the latest total, some 43,265 approvals with a total value of £6.9 billion were for home buyers, representing a 14% increase on June 2013. The increase comes after toughened mortgage lending rules came into force in April under the Mortgage Market Review (MMR), which forced lenders to spend more time sifting through evidence to back up what mortgage applicants said about their spending habits, in order to make sure they could afford their loan repayments, both now and as and when interest rates eventually rise.

Richard Woolhouse, chief economist at the BBA, said: "These figures show that mortgage approvals are rising again after four months of decline.

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