THE vast bulk of economists are forecasting UK base rates will be cut from their record low of 0.5 per cent next month, after surveys showing sharp economic contraction following the Brexit vote, a poll has revealed.
And rate-setter Martin Weale, who signalled early last week that he was not yet persuaded there was a need to cut rates next month, has now declared that he sees things “rather differently” after the surveys from the Chartered Institute of Procurement & Supply on Friday. These surveys signalled the sharpest monthly fall in UK economic output since spring 2009, in the depths of the last recession.
CIPS’s surveys showed significant contractions in both the UK services and manufacturing sectors this month, following the UK electorate’s vote on June 23 to leave the European Union, and stoked fears that the economy would fall into recession.
Mr Weale, viewed as one of the more hawkish members of the Bank of England’s Monetary Policy Committee, said last week that uncertainty over the economic impact of the Brexit vote “points to the argument that we should wait for firmer evidence before making any policy change”. He added that the Bank of England was “not a nurse to markets”.
However, signalling a shift of stance in the wake of CIPS’s surveys, Mr Weale told the Financial Times in an interview published yesterday: “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.”
He added: “What I said last week is that I would like more information as well as more reflection and I have had more information. Although you can’t say there’s a clear signal, if you spend all the time waiting for a clear signal, it never comes.”
Reuters revealed yesterday that, of 49 economists polled since Friday, all but three expect UK base rates to be cut by at least a quarter-point when the MPC meets on August 4.
Of the 36 economists in the poll who expressed an opinion on whether the MPC would increase its £375 billion quantitative easing programme, which has been aimed at boosting the economy, 17 believed it would and 19 thought it would stand pat. The QE programme has been held at £375bn since 2012.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here