The Bank of England's deputy governor Ben Broadbent opted to focus on the impact of Brexit on trade during a speech in Scotland today, warning that Britain will be hurt if trade links with the European Union suffer.
A reduction in trade would affect both the British economy and the EU's, and cause prices to rise, Broadbent said in a speech to the Scottish Council for Development and Industry in Aberdeen.
Broadbent didn't though, provide any further insight on his perspective on interest rates, which will disappoint those hoping for indications of a more hawkish turn.
The pound dipped on his speech, down to $1.2887 against the dollar, when Broadbent focused on the benefits of globalisation. He warned that less trade with the European Union would hurt Britain's comparative advantage in exports of financial services. And at the same time, Britain would have to produce more of the things it currently imports - and isn't so good at creating.
"All else equal, the first shift - i.e. away from services exports - would tend to lower UK income, the second to raise certain costs - that is, of food and machinery," he said.
"Trade really is mutually beneficial and less of it costs us all," Broadbent said. "That these truths are a couple of centuries old, and not always widely accepted, doesn't make them any less true."
The markets had been waiting for any clues on whether Broadbent would back governor Mark Carney and the doves, or swing across to the hawks and back an interest rate rise. Ahead of the speech, the pound had made strides; it has been swept up in recent weeks thanks to hawkish hints from policymakers at the Bank of England.
Panmure Gordon's chief economist Simon French said the failure to discuss interest rates could suggest Broadbent looked more likely to vote for no change next month.
You have to scrape barrel to get Broadbent's views ahead of Aug MPC. If scraping I wld say points to n/c vote given recent weak exports data— Simon French (@shjfrench) July 11, 2017
There has been division over the best course of action going forwards though, with BoE economist Gertjan Vlieghe pushing back against building pressure from his colleagues to vote for higher interest rates earlier this month.
However, Ian McCafferty, a member of the Monetary Policy Committee (MPC) who voted to raise the Bank’s key interest rate in June, recently said the bank should raise its key interest rate twice in the next two years.
At the last MPC meeting, interest rates were held at a vote of five to three. The three dissenters argued action was needed to tone down inflation, which reached an annual rate of 2.9 per cent in May, well above the Bank’s two per cent target.