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LONDON -(Dow Jones)- The U.K. Monetary Policy Committee will extend its quantitative easing bond-buying policy if necessary, Bank of England Chief Economist Spencer Dale said Friday, but noted tentative signs that nominal spending is starting to accelerate.

In a speech at Cambridge University, Dale responded to criticism that the BOE has given less guidance on the likely nature of its exit strategy then other central banks, saying that with only two instruments--interest rates and quantitative easing--which can be tightened in any order and at any time, there is less to explain.

The MPC voted last month to suspend its quantitative easing program, through which it has bought GBP200 billion in mostly U.K. government bonds with freshly created central bank money. It launched the unconventional policy in March 2009, after slashing its key interest rate to an all-time low of 0.5%.

"The Committee stands ready to make further asset purchases should the outlook warrant them," Dale said. "Just as with movements in Bank Rate in more normal times, a pause in monetary loosening does not necessarily mean that loosening has come to an end. It will all depend on how the outlook for inflation evolves."

Dale pointed to a range of evidence that the unconventional policy is already having the desired effect.

He stressed that the main impact from quantitative easing is likely to come from the stock rather than the flow of asset purchases, and that, along with the ultra-low levels of interest rates, it should continue to provide "substantial stimulus" for "some time to come."

Economic models suggest that the BOE's GBP200 billion of purchases could be expected to push asset prices up by 20% to 30%, he said, although he noted there are huge uncertainties.

Dale also addressed the weak growth of broad money supply, which the Bank initially identified as a key measure of the effectiveness of its quantitative easing policy.

While the BOE's preferred measure of broad money supply picked up slightly in January, it remained extremely weak, with three-month annualized money supply growing 1.9%, compared with historical rates of between 6% and 9%.

Dale said that, while impossible to prove, money supply growth would almost certainly have been far weaker without the asset purchases, and noted that large equity and debt issuance by U.K. banks had also curbed its expansion.

"Given that the non-bank private sector is likely to have been the source for much of this funding, this is likely to have squeezed broad money growth," Dale said.

"But the counterpart to this fall in private sector deposits is a strengthening in banks' balance sheets which should in turn aid the recovery by improving the availability of bank lending."

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