The Bank of England’s Andy Haldane has said that easing of monetary policy needs to be delivered ‘promptly and muscularly’.
Haldane, who is on the MPC, which yesterday decided to hold interest rates at 0.5 per cent, says that the economic impact of the UK’s decision to leave the EU is not yet known.
Speaking on June 30, in a speech just published, Haldane said he 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”.
“In my personal view, this means a material easing of monetary policy is likely to be needed, as one part of a collective policy response aimed at helping protect the economy and jobs from a downturn.
“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.”
He added that the Bank is waiting on more data about Brexit before it can determine the future outlook for the UK economy, saying “at present, we have only the smallest trail of data breadcrumbs”.
However, Haldane appears to acknowledge that the Bank’s monetary policy tools are limited.
“The tools available to monetary policymakers, like the Bank of England, are small in number. The Bank can set only one interest rate – the interest rate on Bank of England money. This interest rate affects every region, every sector, every company and every individual that uses Bank money.”