Interest rates could fall further, says Bank economist

The chief economist of the Bank of England has said UK interest rates are as likely to fall further as to rise.

Speaking in a personal capacity, Andy Haldane – a member of the Bank’s Monetary Policy Committee (MPC) – said he could not see a strong case for a move in either direction.

BBC economics editor Robert Peston described the comments as “big stuff”.

UK interest rates were reduced to 0.5% in March 2009 and have remained at that level ever since.

In February, the Bank changed its guidance and hinted that rates could be cut further if the economy needed additional stimulus.

Up to that point, most commentators and investors had assumed that a rate rise was most likely to happen late this year or early next.

But Mr Haldane said that if a computer algorithm set rates rather than the MPC, then “the optimal path for interest rates would involve them being cut in the short-run towards zero for around a year”.

Sterling fell sharply against the US dollar following the comments – at one point in late afternoon trading, it was 1.5% lower at $1.4738.

BBC

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Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam