A stimulus package for the UK this August just became more likely

 
Hayley Kirton
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Bank Of England
Another MPC member has issued a call for action (Source: Getty)

A new package of stimulus measures just became more likely the next time the Bank of England's Monetary Policy Committee (MPC) meets, after a key member indicated he had had a change of heart.

The central bank shocked numerous people earlier this month when it opted to keep interest rates at 0.5 per cent. Many had speculated the rate would be cut to calm the markets following the Brexit vote.

Although just one MPC member – Gertjan Vlieghe – voted in favour of an interest rate cut, Martin Weale, an MPC independent member, suggested in an interview with the Financial Times today he might be about to do a u-turn on his 'wait and see' approach.

Weale said: "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."

Read more: Top world economies commit to contain Brexit fallout

Weale's comments follow a string of weak data for the economy. Most recently, yesterday's CBI industrial trends survey showed many manufacturers were fretting for the future following the UK's vote to leave the EU.

And last week, Markit's UK purchasing managers' index (PMI) indicated the economy had contracted at its steepest pace in around seven years.

Speaking of the PMI data, Weale said: "They are the best short-term indicator we have at the moment. I certainly feel they are very material for the decision we'll be taking next week."

Read more: Bank of England: "No clear evidence" of slowdown since Brexit vote (yet)

However, Michael Hewson, chief market analyst at CMC Markets, had his doubts that Weale's words would shift the interest rate.

"While Weale appears to have changed his mind, his influence on the rest of the committee is likely to be limited, firstly because he is leaving but also because over the past few years he has voted against the status quo on a fairly regular basis without taking the rest of the MPC with him," Hewson said.

"This suggests that while he may well join Vlieghe in voting for a rate cut or further stimulus we would still need to see another three members to do the same when the Bank of England meets next week along with the latest inflation report, which could well offer further insights into the health of the UK economy."

Read more: Why the UK will need more than rate cuts to offset Brexit shock

Interest rates have now been stuck at 0.5 per cent for more than 80 months in a row.

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