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Bank of England raises prospect of rate cut

The Bank of England may need to cut interest rates in order to prop up UK growth, chief economist Andy Haldane has warned.

In a speech to the Portadown Chamber of Commerce in Northern Ireland today, Haldane said the case for raising rates is “some way from being made”, before raising the prospect of a possible cut from the current level of 0.5 per cent.

He said: “With subdued world growth and prices, and a sharp appreciation of sterling whose effects in lowering imported prices have yet fully to pass-through, I am not as confident as I would like that one percentage point of additional nominal pick-up will be forthcoming over the next two years.

“In my view, the balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside.

“Against that backdrop, the case for raising UK interest rates in the current environment is, for me, some way from being made. One reason not to do so is that, were the downside risks I have discussed materialise, there could be a need to loosen rather than tighten the monetary reins as a next step to support UK growth and return inflation to target.”

Earlier this month the Office for National Statistics confirmed UK inflation had returned to 0 per cent in August, having risen to 0.1 per cent the previous month.

Across the Atlantic US authorities yesterday voted against raising interest rates, keeping federal targets at 0-0.25 per cent.

Of the nine members of the Federal Open Market Committee, only Richmond Federal Reserve Bank president Jeffrey Lacker voted for an increase, arguing for a 25 basis point rise.

The vote means that US interest rates have now been kept at the same level since December 2008.

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  • Simon Murray 20th September 2015 at 12:41 am

    Shows how pointless the endless talk of interest rate rises is. There is no economic justification and the more you look at the mounting concerns about growth, the less likely it is going to happen anytime soon.

  • Simon Murray 18th September 2015 at 7:48 pm

    At last some sensible comment. There are massive storm clouds on the horizon with China’s economic slowdown starting to impact on future growth, the refugee crisis and neglible inflationary pressures. Who would be prepared to bet that there will be no rate rises in 2016?

  • Stuart Gregory 18th September 2015 at 5:16 pm

    It’ll be the usual – string it out as long as possible, leave behind absolute chaos – then leave to get a highly paid job elsewhere.

  • Freddie 18th September 2015 at 4:16 pm

    What was that about forward guidance plus all the other b/s ? Taxi for Mr Carney and I will pay for it !