LONDON (Reuters) – The Bank of England will probably need to cut interest rates if Brexit is delayed again, leading to further uncertainty, rate-setter Gertjan Vlieghe said on Tuesday, adding that slack was probably building in Britain’s economy.
“A scenario of entrenched Brexit uncertainty is likely to keep economic growth below potential, and require some monetary stimulus,” Vlieghe said in a speech to the MMF Monetary and Financial Policy Conference held at Bloomberg in London.
Vlieghe said in July that the BoE’s response to further delays to Brexit would probably lie between the “smooth Brexit” scenario that could lead to a resumption of rate hikes, and a “no deal” Brexit in which rates could be cut close to zero.
In his speech on Tuesday, Vlieghe said the global economic outlook had deteriorated since July and that slack was probably rising again in Britain’s economy, which would have significant consequences for monetary policy.
(Reporting by David Milliken, writing by Andy Bruce, editing by William Schomberg)