The Bank of England is unlikely to withdraw economic stimulus yet as the recovery from recession remains "bumpy and uneven," a senior policymaker said Monday.
Even as Prime Minister David Cameron talked up the country's economic prospects as part of plans to replace tens of thousands of public sector jobs lost because of harsh spending cuts, Bank of England deputy governor Paul Tucker said "the headwinds remain reasonably strong."
"Earlier in the year I had expected, half expected perhaps, that by this time in the year the Bank of England would start to withdraw the monetary stimulus we had provided to the economy," Tucker told the annual conference of the Confederation of British Industry, the country's leading business lobby group. "That seems to me, in terms of my own personal vote, rather less likely now than it was."
The central bank has been faced with the difficult _ and conflicting _ task of dealing with surging inflation and a stuttering economic recovery since bringing interest rates down to a record low of 0.5 percent 19 months ago.
With little room left to cut rates, the bank kicked off its so-called quantitative easing program to buy assets and increase the amount of money in the economy early last year. That program was frozen in February at 200 billion pounds ($314 billion) as inflation pushed high above its 2 percent target.
The nine-member Monetary Policy Committee was split three ways at the last meeting, with one member voting to increase quantitative easing and another to increase interest rates with the remainder _ including Tucker _ voting for no change.
With the U.S. Federal Reserve signaling it may add another round of monetary expansion at its November meeting, markets are watching for signs of which way its British counterpart is leaning. Quantitative easing is intended to stimulate growth, but carries risks of inflation and weakening a country's currency.
Tucker and Cameron were both speaking at the CBI annual conference a day before official gross domestic product figures for the third quarter are due to be released, giving some clearer indication of how the recovery is progressing.
Economists expect GDP growth to slow sharply to around 0.4 percent, after a 1.2 percent gain in the second quarter thanks to construction activity.
Tucker said the slow reconstruction of the global banking system was providing a major obstacle to recovery.
"Credit conditions facing large businesses and even small businesses are better than they were a year ago but they're still too tight," he said.
In an earlier address, Cameron stressed improvements to bank lending as important to economic recovery.
Barclays PLC President and CEO-elect Robert E. Diamond cautioned, however, that the objective could never be to meet lending demand 100 percent because to approve every application would "sow the seeds of the next downturn."
Diamond said that he understood calls for the banking sector to shoulder more of the tax burden in the wake of the public sector spending cuts, but warned that if that impedes international competitiveness it will hamper banks' roles in supporting the domestic economy.
Cameron had used his speech to strike an upbeat note for the economy after a week dominated by the spending cuts, the deepest since World War II.
The British leader promised to drive exports higher and cut regulatory red tape to encourage private sector innovation as his government seeks to replace the 490,000 public sector jobs that are estimated to be lost as the government trims public spending by 81 billion pounds through 2015 to eliminate the country's massive 156 billion-pound budget deficit by 2015.
Cameron also laid out a 200 billion pound plan to improve the national infrastructure and plans to promote bank lending for small businesses and encourage greater private sector competition.
"This is an incredible opportunity for Britain, for new start-ups to flourish, for innovations to drive growth and create jobs," he said. "To build that new dynamism in our economy, to create the growth, jobs and opportunities Britain needs, we've got to back the big businesses of tomorrow, not just the big businesses of today."
Condemning as "shocking" the fact that Britain's share of exports to China and India is just 3.2 percent, Cameron said he would call for structural reforms of the single market at a meeting of the European Council this week and would push for the completion of the Doha round of trade talks at the Group of 20 summit in South Korea next month.
Back home, the British leader is prioritizing the improvement of infrastructure, noting that congestion on roads costs the economy some 20 billion pounds each year and rail delays another 1 billion pounds.