Deputy Bank of England governor Dave Ramsden has said he thinks gradually increasing interest rates could still be the right path if Britain achieves a smooth exit from the European Union.
Threadneedle Street has repeatedly struck a more hawkish tone than its American and European counterparts, saying it foresees “limited and gradual” rate rises unless Britain’s economy takes a downturn.
Ramsden spoke to Bloomberg yesterday after Prime Minister Boris Johnson announced a “great new” deal with the EU that would see existing trading arrangements stay as they are for at least a year while a new trade deal was reached.
“The kind of guidance we’ve been giving – in the world of a deal it still applies,” Ramsden said in the interview, published today. “We’re not saying over what timeframe, but limited and gradual is a reasonable qualitative framing.”
Ramsden’s view diverges from some of his Bank of England policymaker colleagues. Extern monetary policy committee (MPC) members Gertjan Vlieghe and Michael Saunders have suggested rates should be lower even in the event of a deal.
The BoE deputy said a Brexit deal and some certainty for UK businesses will lead to “some pickup in investment” and will bolster demand and “hopefully” productivity.
Business investment has slumped in 2019, with firms reticent to spend until there is greater certainty over Brexit.
Johnson’s new Brexit deal goes before MPs tomorrow in what looks set to be an incredibly tight vote. Ramsden said the BoE will keep an eye on currency movements after the vote.
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