Bank of England (BoE) policymaker Michael Saunders has said he is sticking to his view that interest rates should be cut because of weaknesses in the UK’s labour market and wider economy.
“It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the two per cent inflation target,” Saunders said in a speech on Wednesday morning.
Read more: Bank of England rate-setter hints at cut
“With limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present.”
Saunders was one of two of the BoE’s monetary policy committee’s (MPC) nine members who voted to cut interest rates late last year.
Since then, several other MPC members — including outgoing BoE governor Mark Carney — have suggested a rate cut may be necessary.
Saunders said that while some recent surveys had suggested Britain’s economy had improved, while others had worsened and remained sluggish.
“But, taken as a whole … business surveys are generally soft and consistent with little or no growth in the economy,” he said.
“My own view is that, even if the economy improves slightly from the recent pace, risks for the next year or two are on the side of a more protracted period of sluggish growth than the MPR (Monetary Policy Report) forecast,” Saunders added.
Sterling was 0.2 per cent down against the dollar in morning trading on Wednesday.