MPC member suggests he is open to rate cut

Meanwhile, the MPC member hammered home his view that young people rather than old people had borne the brunt of the recession, in the face of continuing protest that retirement incomes are being hit hard by QE.

Minutes of recent MPC meetings have highlighted the committee's intention to re-assess whether there is merit in cutting rates further once the impact of the Bank and UK Government's £80 billion Funding for Lending Scheme (FLS), which started on August 1, become clearer.

MPC members have been wary of cutting rates further, fearing this could hit banks' margins and cause them to rein in lending even more. However, the FLS offers funding to banks at below-market rates, together with financial incentives for them to increase lending above that already planned.

Mr Weale told The Herald he thought the FLS would have a "reasonably powerful effect".

He voted in July for the latest £50bn increase in QE to £375bn in a seven-to-two vote. QE is aimed at stimulating activity by boosting money supply through the purchase of Government and corporate bonds, funded by the issuance of central bank reserves.

Asked whether he would have a preference for a quarter-point cut in rates or another rise in QE, if further monetary support for the economy were required and it were a choice between one or the other, Mr Weale replied: "I think, at the moment, I am very comfortable with the view that we need to establish whether the effects of an interest rate reduction would be positive before we might do it.

"I think, if it were clear that the interest rate could be reduced ... without finding some banks got themselves into a position where they had to reduce lending because of the effects of an interest rate cut on their profits (and) if it were clear a reduction in interest rates would be like all other reductions in the interest rate, I think I would probably prefer that to more QE, if I was choosing between them."

However, he added: "I certainly, and I would imagine my colleagues, would want to be very clear an interest (rate cut was the) right thing to do before we did it."

Mr Weale was speaking on the day the Bank published a paper declaring most people in the UK would have been worse off without QE, "including savers and pensioners". He last night endorsed the views in this paper.

As Saga director-general Ros Altmann contended that QE "is permanently impoverishing pensioners" and that "all those buying annuities after QE started will have permanently lower future incomes", Mr Weale declared young people had been hit hardest by the UK recession.

He said: "From the work I have done, the group that has been most affected by the...shock to the economy over the last four years has been young people, rather than old people.

"A lot of young people have had more trouble finding jobs...Real wages of young people have been squeezed more than real wages of old people, and spending of young people seems to have been squeezed more."

Mr Weale added: "If you look at what has happened to the economy as a whole over the last four years, it seems to have been young people that have been more affected...Although there have been fewer opportunities for them, the position is not as bad as it would have been if we hadn't pursued the policy (of QE)."

He argued the boost which QE had provided to asset prices meant people buying annuities had "more money to put into them than they would have done".

Mr Weale said the UK's export performance had been "disappointing".

Commenting on his impression of the Western Isles economy, he said: "The sense I am getting is perhaps things have been a bit more resilient than in the United Kingdom as a whole. One of the factors behind that seems to be that tourism has held up reasonably well."

Asked if he saw any case for further monetary stimulus at the current juncture, he replied: "At the moment, I don't think I do...I think the right thing in my job is to look at the situation each month."