BoE's Weale says tight credit may be hurting UK economy

LONDON Fri Dec 14, 2012 2:00am GMT

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LONDON (Reuters) - Scarce credit and fears about the cost of future borrowing may be holding back Britain's economic recovery, a Bank of England policymaker said on Friday.

In a speech to be delivered in New Zealand, Martin Weale focused on the use of economic modelling to analyse policy, without making any comments on monetary policy in Britain.

"People are more likely to be tolerant of any given level of debt if they believe that they can obtain further credit, should the need arise, than if they think they are up against a credit limit. So a fear that credit is tight itself encourages deleveraging," he said, according to the text of his speech provided by the BoE.

"Tightening of credit and fear of tight credit has affected both firms and households and, in the United Kingdom at least, this may be limiting the scope for recovery," he added.

(Reporting by Olesya Dmitracova; editing by Ron Askew)

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