BOE’s Chief Economist Says Interest Rates Could be Cut

Bank of England chief economist Andrew Haldane has put himself on a collision course with Mark Carney, the Bank’s governor, by suggesting policymakers may be forced to slash interest rates to zero in the coming months to tackle the threat of deflation.

Striking a markedly different tone to Carney, who told the House of Lords economic affairs committee last week it would be “extremely foolish” to cut rates now, Haldane used a speech to a business club in Rutland to lay out reasons the nine-member monetary policy committee should be concerned that inflation has “dropped like a stone”.

“On the MPC’s central view, inflation will remain close to zero in the near-term, before rising to reach the inflation target over a two-year horizon. The risks to inflation at that horizon are plainly two-sided. But my personal view is that these risks are skewed to the downside,” Haldane said. “In my view, that means policy needs to stand ready to move off either foot in the period ahead.”

In the City, the FTSE100 closed at a fresh record high of 6962 after the news, as investors welcomed the possibility of a rate cut. Nerves were also soothed by Federal Reserve chairman Janet Yellen’s reassurances on Wednesday that she would not rush to raise US interest rates. Sterling lost 2c of its value against the dollar over the day, to trade at $1.4740.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza