Worst of recession 'could be over'

Government moves to cut interest rates, increase public spending and boost the money supply were starting to have an effect, David Miles, the newest member of the Bank of England's Monetary Policy Committee said.

He told the Western Mail newspaper: "Economic history teaches us that a combination of tax cuts, running large fiscal deficits, substantial cuts in interests rates and more quantitative easing is likely, with a certain time lag, to have a substantial impact on demand in the economy and it may well be that the worst of the recession may well be behind us."

Mr Miles added: "That's not a confident prediction but a judgment about what may be the case."

His comments came as stock markets on both sides of the Atlantic showed signs of recovery.

The FTSE 100 Index advanced 84.6 points to close at 4053 as better-than-expected first quarter figures from US giant JP Morgan Chase gave banks a further boost.

In the US, the Dow Jones industrial average jumped 96 points to its first finish above 8,100 since February 9.

Mr Miles admitted the Bank of England was concerned about the fall in lending to the corporate sector, but said boosting the money supply would make it easier for banks to lend.

"I'm less pessimistic than many of where the economy may be going," he said.

Mr Miles, the chief UK economist for investment bank Morgan Stanley, joins the MPC in June.