The Bank of England’s (BoE) actions to cut interest rates after the referendum had little effect on the UK's powerful economic growth, according to its former deputy governor.
Sir Charlie Bean said: “It may have some small effect at the margin but I really don’t take the view that the policy package that was announced after the referendum is likely to have had that powerful an effect on the economy.”
The BoE cut the bank rate in August from 0.5 per cent to 0.25 per cent and unleashed a massive round of quantitative easing after the 23 June Brexit vote in anticipation of a shock to UK growth.
In testimony to the Treasury select committee Bean said the rate cut had likely not had an effect: “Rates are so low already that the degree of traction you get is probably pretty low.”
BoE governor Mark Carney has repeatedly credited the move with at least part of the UK economy’s strength since the referendum.
Carney claimed the August stimulus saved 250,000 jobs from being lost in the six months after the referendum.
Bean spent 14 years on the MPC, and was a member when Carney started in his role as governor.
Bean, who also served as chief economist and latterly as deputy governor of the BoE from 2008 until 2014 as the financial crisis raged, added the MPC had resisted lowering the bank rate below 0.5 per cent because of the “potential adverse effects of squeezing bank profit margins even more.”
Bean said: “There’s an argument for trying to reverse that when circumstances are appropriate.”
However, Bean also defended quantitative easing asset purchases, which have been criticised in some quarters for boosting asset prices, increasing inequality as asset owners grow richer.
He acknowledged that the higher prices “benefit the asset rich to the cost of those who don’t have assets but want to acquire them,” but said the net effect is “not clear” despite the likely intergenerational effects of the policy.
“These intergenerational shifts are one of the big stories of the last 10, 20 years,” Bean said.