Martin Weale, an independent member of the Bank of England’s Monetary Policy Committee, and one of Britain’s most senior economic policy advisors has warned that the central bank can not stop Britain slipping into a recession this year if the economy is already starting to struggle in the aftermath of the UK’s vote to leave the European Union. Only last week, Martin Weale had said that he needed to see more evidence of the UK’s economic weakness before considering a looser policy.
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However, Friday’s flash PMI figures painted a different picture of the United Kingdom economy, with output and orders falling for the first time since the end of 2012.
The FTSE index was boosted on Tuesday by fresh expectations of more aggressive monetary easing by the Bank of England at the August policy meeting. “They are the best short-term indicator we have at the moment”.
The surveys are “very material for the decision we’ll be taking next week” and quantitative easing can still be an effective tool, he said.
Of other MPC members, Gertjan Vlieghe, voted to cut rates in June, while Mr Weale, Mark Carney (the BoE governor), and Andy Haldane have now said they were minded to do so at the August meeting. One member, Kristin Forbes, has publicly said she’d support unchanged policy, indicating a desire to “keep calm and carry on”, according to the FT.
“Do I think we’re heading lower (for sterling)?”
And on Tuesday the British Bankers’ Association said the number of approvals for home loans in June fell to its lowest since March 2015 – though this represented pre-referendum nerves, and it would not be possible to judge the impact of the Brexit vote until later this year.
“I see things rather differently from what I would have done had we not had those numbers and the material point is that they were collected after July 12, so after the initial shock of the referendum”.
Last Tuesday Weale signalled that he was not yet persuaded about a need to cut benchmark United Kingdom interest rates from their record low.
‘Although you can’t say there’s a clear signal, if you spend all the time waiting for a clear signal, it never comes’.
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“However, the sharp appreciation of the exchange rate since the start of the year is threatening to derail the Bank’s efforts to lift price pressures, and we expect policymakers to step up the pace of asset purchases and probably also cut the interest rate on excess reserves at the upcoming meeting”.
