The Bank of England may need to cut interest rates in the likely scenario that h...
BARNSLEY, England - The Bank of England may need to cut interest rates in the likely scenario that high levels of uncertainty over Brexit persist, policymaker Michael Saunders said on Friday in the first clear signal that the BoE is considering a cut.
Saunders - who was one of the first BoE policymakers to vote for higher interest rates in 2017 and 2018 - said it was now his view that the unpredictable path of Brexit would effectively act as a “slow puncture” for the economy. Even if Britain temporarily avoids a no-deal Brexit, uncertainty was likely to remain high, either due to the risk of a no-deal Brexit in 2020 or due to a lack of clarity about longer-term trading relationships with the EU, Saunders said.
The economy shrank by 0.2% in the second quarter of 2019 and last week the BoE trimmed its third-quarter growth forecast to 0.2% from 0.3%, while inflation dropped more sharply than expected to 1.7% in August. “In general, I would prefer to be nimble... accepting that it may be necessary to change course if the outlook changes significantly,” he said.
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