Miles sees no rapid return to growth

By David Milliken and Fiona Shaikh

LONDON (Reuters) - New Bank of England policymaker David Miles warned that any signs of a rapid economic recovery were likely to prove a false dawn, and joined Bank colleague Tim Besley on Thursday in ruling out tighter monetary policy in the short term.

Miles, in his first appearance before legislators since his appointment to the Bank's Monetary Policy Committee last month, said economic growth was likely to be anaemic and described the banking system as still being "on life support."

Besley, addressing a financial regulation conference at the London School of Economics, said it was still too early to tell if the Bank's 125 billion pound quantitative easing programme was working, let alone set detailed conditions for reversing it.

Both policymakers stressed the importance of bank lending returning to normal -- and received only limited encouragement from a Bank survey released earlier in the day, which showed banks more willing to lend but pessimistic about demand.

"The banking sector is on life support and the ability of banks to lend is curtailed," Miles told the treasury committee of Britain's lower house of parliament.

"So the prospect of a rapid return to growth doesn't seem a highly probable outcome. But there are reasons for thinking the period of the most rapid declines in output are behind us," he continued.

Lawmakers asked him about the likelihood of a sharp 'V'-shaped recovery, on which government plans to bring down Britain's record borrowing are based, and Miles warned against drawing too many conclusions from initial signs that the downturn may be easing.

"It may be the case that we get what looks like a very sharp rebound over the next few quarters. One might interpret that as a 'V'-shape, but that doesn't really tell you an awful lot about what the likely path of GDP growth will be."