A top UK rate-setter Monday expressed his willingness to approve a further loosening of monetary policy, noting the economic benefits of sub-zero interest rates in other jurisdictions.
“I stand ready to vote for more stimulus measures should they be needed,” said Jonathan Haskel, external member of the Bank of England’s Monetary Policy Committee, in a virtual address to an inflation conference sponsored by Barclays Bank.
Inflation has remained below the Bank’s 2% target for over a year, and Haskel noted that the “near-term risks” to the UK economy and inflation target are “skewed to the downside”. Inflation expectations for business and consumers remain “extremely weak”, he added.
Haskel waded into the confusion sown by his colleagues on the MPC over the suitability of negative interest rates in the UK, initially saying that evidence from other economies “strongly supported” the benefits of sub-zero rates in other economies. He then rephrased his remarks, noting the “positive evidence” that negative rates have been passed through to business and consumers.
The BoE has been conducting a review of the policy after Governor Andrew Bailey executed a U-turn over the policy after the economy collapsed as a result of lockdown imposed to slow the spread of coronavirus over the spring. Bailey has stressed that a rate reduction is an option available to the MPC, but has downplayed the imminent deployment of the tool.
Haskel echoed recent comments made by Bailey in noting that the efficacy of sub-zero rates is “dependent on the structure of the financial system and where we are in the [business cycle]. Late last month, Bailey suggested that negative rates may be more effective if deployed after output has hit a trough.