Bank of England Governor Mark Carney yesterday signalled the possibility of a cut in base rates from 0.75 per cent if evidence built that current UK economic weakness could persist.
Sterling was, at 5pm in London, trading around $1.3069 in the wake of Mr Carney’s comments, down half-a-cent on its Wednesday close.
Two members of the Bank’s nine-strong Monetary Policy Committee, Michael Saunders and Jonathan Haskel, voted unsuccessfully for a quarter-point cut in benchmark UK interest rates in November and December. Mr Carney voted for no change in rates at these meetings.
The Bank of England Governor yesterday cited “tentative signs” of global growth stabilising, and a tight UK labour market.
However, he highlighted the impact of Brexit and declared: “There are downside risks from global growth and the possibility that uncertainties over future trading relationships could remain entrenched. With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.”
He added: “The MPC has repeatedly emphasised that monetary policy cannot prevent either the necessary real adjustment as the UK moves to its new trading arrangements or the weaker real income growth likely to accompany that adjustment. Monetary policy does, however, have a role to play in supporting the economy during the adjustment process.”
Financial markets are pricing in a roughly 14% chance of a rate cut at the MPC’s meeting on January 30. This will be the last MPC meeting for Mr Carney, who will be succeeded as Bank Governor by Financial Conduct Authority chief executive Andrew Bailey on March 16. The chance of a rate cut by mid-year is put by markets at about 50%.
Surveys this month from the Chartered Institute of Procurement and Supply and IHS Markit have fuelled fears the UK economy may have failed to grow in the fourth quarter of last year.
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 hereLast Updated:
Report this comment Cancel