01292020

Third Bank executive hints at rate cut possibility


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Bank of England

Another Bank of England policy setter has floated the idea of cutting the central bank’s main interest rate.

The rate is used by banks and other lenders who set borrowing costs.

It affects everything from mortgages to business loans and thus has a big effect on peoples’ and firms’ finances.

Gertjan Vlieghe told the Financial Times he will consider voting for a rate cut depending on how the economy has performed since the December election.

It makes him the third policy setter this week to suggest they may be willing to cut rates when the monetary policy committee (MPC) next meets at the end of this month.

His comments follow similar views from Silvana Tenreyro, another external member of the MPC, who spoke at an event hosted by the Resolution Foundation think tank.

The MPC is made up of nine members. Governor Mark Carney, three deputy governors, the bank’s chief economist and four members who aren’t bank employees and who are appointed by the government.

Mr Carney, who will leave his job in March, said in a speech on Thursday that a rate cut was a possibility.

“With the relatively limited space to cut Bank rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response,” he said.

All three committee members were careful to say that they would need to see more data before making a decision.

Another decision is due on 30 January. The last time the committee met, in November, two members voted to cut rates.

Jonathan Haskell has said risks to the economy were “lingering” in a speech after his vote was cast. The other member to vote for a cut, Michael Saunders, hasn’t yet commented officially about his vote, but is scheduled to make a speech on 15 January.

Currently, the rate is at 0.75%, not far from its historic low of 0.25%. Cuts and rises have been by 0.25 percentage points in recent years.



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