Sterling rose to the day’s high on Monday, while British stock markets trimmed gains after outgoing Bank of England policymaker Martin Weale said he was unsure if he would back an interest rate cut at next month’s meeting.
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But Weale said today: “For there to be a case for easing policy I will need to expect weakness in output to be large enough to more than compensate for any overshoot in inflation on the assumption that policy is unchanged in the near term”.
And since then there have been conflicting reports coming from MPC members.
The Bank of England was widely expected to cut interest rates last week in response to the UK’ surprise decision to leave the European Union, which sent the pound falling to a 31-year low and is widely expected to push Britain into recession.
Mr Weale added: ‘In theory, there was a case for cutting rates in the short-term, before raising them as the inflation impact of sterling’s sharp decline fed through.
Mr Weale said there was a risk of an “over diagnosis” of stock market movements and cast doubt that a closely watched survey by GfK, which showed the biggest drop in consumer confidence since 1994, was a “useful signal” for future growth and consumer spending. 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 also gave short shrift to the idea that early action was needed to reassure people.
The minutes from Thursday’s meeting suggested a rate cut from 0.5% may come next month, revealing that “most members of the Committee expected monetary policy to be loosened in August”.
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Explaining his decision to vote for a cut to interest rates last week, Vlieghe, who previously worked for the Bank as a top adviser to former governor Lord King, said: “I favoured an immediate interest rate cut, to be supplemented by a package of additional measures in August”.
