A Bank of England policymaker has hinted he could vote for an interest rate cut at the end of this month, making him the third BoE figure to float the idea this week.
Gertjan Vlieghe told the Financial Times that if data does not show the UK economy ticking up from its current subdued state, he would seriously consider voting to cut the Bank’s main rate from 0.75 per cent to 0.5 per cent.
The former Deutsche Bank strategists’s comments followed a pro-cut intervention on Friday from fellow BoE monetary policy committee (MPC) member Silvana Tenreyro. She told a Resolution Foundation event that her “inclination is towards voting for a cut in rates in the near term”.
Outgoing Bank governor Mark Carney also struck a dovish tone last week, saying in a speech on Thursday that the central bank could cut rates if economic weakness continued.
Economists predict that the UK economy grew at its slowest pace since the financial crisis in 2019. The November GDP reading, out tomorrow morning, is expected to show zero growth.
Vlieghe said his decision regarding interest rates would depend on upcoming survey data, which gives a sense of the health of the economy well before official figures are released.
“Personally I think it’s been a close call, therefore it doesn’t take much data to swing it one way or the other,” he said.
“I really need to see an imminent and significant improvement in the UK data to justify waiting a little bit longer.”
Brexit uncertainty and a global economic slowdown driven by US President Donald Trump’s trade wars weighed on British growth in 2019.
Following Boris Johnson’s emphatic election win, however, firms have become more upbeat, leading to hopes that business investment could recover.
However, if a pick up does not materialise then Vlieghe and Tenreyro are likely to join their MPC colleagues Jonathan Haskell and Michael Saunders in voting for a cut at the 30 January meeting.
Haskell and Saunders dissented at the last meeting in December, recommending a cut while the seven other members opted to hold rates.
Vlieghe said that the committee will soon “get a lot of business and some household surveys that cleanly relate to the period after the election, so that will give us an initial read as to how people are responding”.