The Bank of England’s chief economist has called for a big package of measures to support the UK’s post-Brexit economy, stressing the need for a prompt and robust response to the uncertainty.
Andy Haldane made it clear the Bank’s monetary policy committee would do more than merely cut interest rates from their already record low of 0.5% when it meets in August.
The Bank’s chief economist used a speech to warn that decisive action was required at a time when confidence had been dented by the shock referendum result.
“In my personal view, this means a material easing of monetary policy is likely to be needed, as one part of a collective policy response aimed at helping protect the economy and jobs from a downturn.
“Given the scale of insurance required, a package of mutually complementary monetary policy easing measures is likely to be necessary. And this monetary response, if it is to buttress expectations and confidence, needs I think to be delivered promptly as well as muscularly. By promptly I mean next month, when the precise size and extent of the necessary stimulatory measures can be determined as part of the August inflation report round.”
The Bank surprised the City when it left interest rates on hold at its July meeting held this week, but the minutes of the MPC’s discussions said most of its nine members thought an easing of policy would be required in August.
The tone and content of Haldane’s speech suggest that the MPC will use public appearances to make the case for strong action in August. Options include cutting interest rates to 0.25% or lower, restarting the Bank’s £375bn quantitative easing scheme and providing cut price loans to banks under the funding for lending scheme.
Signs that the Bank is planning a major stimulus package next month put a halt to the upward move in the pound, which had rallied after Threadneedle Street left rates on hold. Sterling lost a cent against the dollar to stand at $1.3245.