The Bank of England will probably need to cut interest rates if Brexit is postpo...
LONDON - The Bank of England will probably need to cut interest rates if Brexit is postponed again, rate-setter Gertjan Vlieghe said on Tuesday, adding to the debate at the central bank about the right response to another delay.
But another of the BoE’s nine rate-setters, Deputy Governor Dave Ramsden, has said Britain’s economy is probably too damaged and made inflation-prone by Brexit for him to back a cut. For too long the BoE had assumed that Brexit uncertainty was about to lift and boost growth, and the delay to Brexit from its original March 29 date and weak growth since highlighted the damage that persistent uncertainty could cause, Vlieghe added.Vlieghe said in July that the BoE’s response to further delays to Brexit would probably lie between the “smooth Brexit” scenario that could lead to a resumption of rate hikes, and a “no deal” Brexit in which rates could be cut close to zero.
Much of Vlieghe’s speech focused on the firepower at the BoE’s disposal to fight a future recession, which he said was now considerably less than before previous downturns.The U.S. Federal Reserve, having hiked rates to levels well above those of European peers, is now cutting them. The European Central Bank has experimented with negative interest rates — something Vlieghe said would not be suitable for Britain.
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