Keep calm and carry on over interest rates, says Bank of England policymaker

Keep calm and carry on over interest rates, says Bank of England policymaker

A Bank of England policymaker has said it is too early to slash interest rates until there is more evidence of an economic hit from the Brexit vote and said rate-setters should "keep calm and carry on".

Kristin Forbes, one of the Bank's nine-strong Monetary Policy Committee (MPC), said there was no need to rush into a rate cut, adding that the impact on growth of the UK's decision to quit the EU would be slow moving.

Economists have pencilled in a rate cut next month after the Bank said last week that most MPC members expected to take action to boost the economy in August.

But writing in the Daily Telegraph, Ms Forbes said: "There may be a case to adjust monetary policy soon, but until more hard data is available, I believe this is a good time to 'keep calm and carry on'."

Her comments echo those made on Monday by fellow MPC member Martin Weale, who questioned whether interest rates would need to be cut next month.

Mr Weale said the Bank was "not a nurse to markets" and there were no signs that consumers or businesses were "panic-struck" following the Brexit decision.

Ms Forbes said the economy was not facing woes on a scale seen in the financial crisis, with financial markets having "stabilised" after initial "panic", while she stressed spending data "do not suggest consumers are cutting back".

She wrote: "This is not 2008. Then markets were collapsing, the financial system stopped functioning, and the global economy was entering a recession. This is not a 'Lehman moment'."

She said while there was a "valid case" to reduce rates from the already historic low of 0.5% or restart the Bank's quantitative easing programme to bolster the Britain’s economy, there was a "dearth" of official data on the economic response to the referendum.

Action taken so far to ease rules offering banks up to another £150bn of lending firepower, together with the weaker pound, had already helped shore up the UK’s economy, she added.

She warned that there were also costs of cutting rates further, with savers set to earn less on their nest eggs and banks making less money on lending.

Figures from the Bank on Wednesday suggested there was "no clear evidence" of a sharp economic slowdown, with firms trying to maintain "business as usual" despite increased uncertainty.


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