Weale cautious on BoE rate cut

MONETARY Policy Committee member Martin Weale has signalled he is not yet persuaded there is a need to cut benchmark United Kingdom interest rates from their record low next month.

The Bank of England last week surprised markets by keeping rates at 0.5%, where they have been since March 2009.

Financial markets have reacted sharply to the United Kingdom’s vote to leave the European Union and since the Committee’s previous meeting, the sterling effective exchange rate has fallen by 6 percent, and short-term and longer-term interest rates have declined.

Weale’s comments came after Andrew Haldane, chief economist at the BoE, had said on Friday that the central bank needed to come up with a package of mutually-complementary monetary policy easing measures in time for a rate-setting meeting on August 4.

Last week, the BoE made a decision to hold interest rates at the existing 0.5%, in spite of expectations of a rate cut.

“This uncertainty points to the argument that we should wait for firmer evidence before making any policy change and least in the absence of any strong arguments for an immediate change”, he said.

He said: “People who trade in markets know that the Monetary Policy Committee sets policy month by month in the way that its members think appropriate”.

Weale – just one of nine MPC members – said he gave “little weight” to the argument for cutting rates early to help boost borrowing to combat any Brexit-fuelled slowdown.

Weale said there were no indication that businesses or consumers were “panic-struck” following the Brexit vote, and sterling increased by 0.7% as a result. “In contrast to the experience of 2008, I do not have any sense that either consumers or businesses are panic-struck”, he added in a speech at the Resolution Foundation think tank. “By promptly I mean next month, when the precise size and extent of the necessary stimulatory measures can be determined”.