BoE's Haldane backs "sledgehammer" stimulus in August
The Bank of England needs to act “promptly” and “muscularly” to stimulate the UK economy following the vote to leave the European Union, the Bank’s chief economist said on Friday.
Andrew Haldane said the BoE needs to come up with a “significant” and “material” package next month to offset the potential slowdown from Brexit.
In the text of a speech from 30 June updated after Thursday’s Monetary Policy Committee meeting, Haldane said: “I would rather run the risk of taking a sledgehammer to crack a nut than taking a miniature rock hammer to tunnel my way out of prison.”
He said that given the scale of insurance required, a package of mutually complementary monetary policy easing measures is likely to be necessary.
“And this monetary response, if it is to buttress expectations and confidence, needs, I think, to be delivered promptly as well as muscularly. By promptly I mean next month, when the precise size and extent of the necessary stimulatory measures can be determined as part of the August Inflation Report round.”
The Bank of England surprised markets on Thursday by deciding to stand pat on interest rates rather than implement a 25 basis points cut as many analysts had been expecting. The BoE voted 8-1 to leave rates on hold at 0.5% but said it expects to boost stimulus measures at the August policy meeting once new economic forecasts are available.