Bank of England Deputy Governor Dave Ramsden said he did not share the views of some of his colleagues who have suggested the British central bank might cut interest rates if the Brexit crisis drags on beyond the current Oct. 31 deadline.
In an interview with The Telegraph newspaper, Ramsden said Britain’s economy had been so damaged by uncertainty about Brexit – chiefly via a steady fall in investment by companies – that it could hamper the BoE’s ability to help it.
Referring to a scenario raised recently by the BoE of “entrenched uncertainty” if the deadline for leaving the European Union is pushed back again, Ramsden said: “I see less of a case for a more accommodative monetary position.”
Fellow BoE rate-setters Michael Saunders and Gertjan Vlieghe have suggested that another delay to leaving the EU might mean lower rates in Britain.
Prime Minister Boris Johnson says he will take Britain out of the EU on Oct. 31, with or without a deal, but lawmakers have passed legislation which they think will force him to seek a delay if no transition agreement is struck in time.
Ramsden told The Telegraph that he was cautious about the economy’s growth potential due to Britain’s poor record on productivity which contracted at the fastest annual pace in five years in the second quarter.
Company wage costs were “picking up quite significantly, which will drive domestic inflationary pressure” while spare capacity in the economy might not have opened up much despite the weakness in underlying growth, he said.
“I think supply potential, the speed limit of the economy, is also slowing through this period. That comes through for me pretty clearly in the latest productivity numbers.”
The global trade war was weighing on firms’ willingness to invest around the world too, Ramsden said.
Several BoE officials, including Governor Mark Carney, have said if Britain leaves the EU without a transition deal, they would probably move to cut rates.
Ramsden said higher public spending announced by finance minister Sajid Javid would also be a factor for the BoE as it would mean “more money going into the economy.”
He declined to comment when asked by The Telegraph whether he had applied to replace Carney, who is due to leave the BoE at the end of January.
Reporting by William Schomberg
Source: UK Reuters