No more rate cuts needed yet, says BoE official Kristin Forbes

A Bank of England panel says Britain faces a challenging period of adjustment following the vote to leave the European Union, as uncertainty about the country’s relationship with the bloc reinforces some financial risks.

The FPC monitors and tries to mitigate risks to the UK’s financial stability – a role it said is important not just for the United Kingdom but for economies worldwide, given Britain’s position as a leading financial centre, worth around 10 times gross domestic product.

In a speech delivered at Imperial College London on Thursday, external monetary policy committee (MPC) member Kristin Forbes defended the Bank’s post-referendum easing measures but stressed that there was no need for further action.

She backed a cut in interest rates in August from 0.5% to 0.25% after the economy appeared to stumble afterthe Brexit vote, but she refused to back a £60bn expansion of the bank’s quantitive easing programme and moves to buy riskier corporate bonds.

Measures to strengthen the financial system will help insulate the United Kingdom from shocks, and global events should be less likely to translate into sharply lower growth rates, said Forbes, who will deliver the speech at an event at Imperial College in London on Thursday evening.

Following the OECD’s upwards revision, chancellor Philip Hammond said: “I am confident that we have the tools necessary to support the economy as we adjust to a new relationship with the European Union”. “But recently they have shifted to a more favourable direction”.

Forbes said the economy could be blown off course if forecasts by the central bank go awry.

Earlier on Thursday, the Confederation of British Industry said export orders had grown rapidly in September, although slightly more slowly than August’s two-year high, as the boost from the fall in the value of the pound after the referendum offset longer-term uncertainty about Brexit.

Sterling gained against the dollar following her remarks. The Organisation for Economic Co-operation and Development thinktank meanwhile made a miniscule upgrade to growth forecasts this year, while halving them for 2017.

She said: ‘The adverse winds could quickly pick up – and merit a stronger policy response.