Michael Saunders, a member of the Bank of England’s Monetary Policy Committee (MPC), said that the UK central bank may have to cut interest rates if Brexit uncertainty persists.
Even if the UK manages to avoid leaving the EU without a deal, rates may still have to be lowered, Saunders said. Brexit uncertainty has caused the UK economy to perform below its potential.
In its last meeting the MPC unanimously held rates at 0.75%.
Mr Saunders was quoted by the BBC as telling local businesses at an event in Barnsley:
“If the UK avoids a no-deal Brexit, monetary policy also could go either way and I think it is quite plausible that the next move in Bank Rate would be down rather than up,”
“In this case, it might well be appropriate to maintain a highly accommodative monetary policy stance for an extended period and perhaps to loosen policy at some stage, especially if global growth remains disappointing,” he said.
Saunders added: ”In general, I would prefer to be nimble, adjusting policy if it appears necessary to keep the economy on track, and accepting that it may be necessary to change course if the outlook changes significantly.”
Saunders comments come a week after the MPC said interest rates would likely increase slowly and gradually if the UK leaves with a deal.