Belfast Telegraph

Bank of England policymaker backs stimulus measures as report points to slowdown

Bank of England policymaker Martin Weale said he favours stimulus measures to shore up the UK economy after a post-referendum report pointed to a major growth slowdown.

Mr Weale, a member of the Bank's Monetary Policy Committee (MPC), shifted his stance in favour of an interest rate cut or an expansion of quantitative easing in the wake of Friday's flash PMI survey , which showed the UK economy had slumped at its fastest rate since the financial crisis.

The value of the pound fell following his comments, but recovered some ground to trade marginally up against the dollar at 1.311 US dollars.

In an interview with the Financial Times, Mr Weale said the Markit Flash UK Composite Output Index results had been the main factor that changed his mind.

"They are the best short-term indicator we have at the moment. I certainly feel they are very material for the decision we'll be taking next week."

He added that the surveys were "a lot worse than I had thought" and showed "expectations have worsened sharply".

"I see things rather differently from what I would have done had we not had those numbers and the material point is that they were collected after July 12, so after the initial shock of the referendum."

Mr Weale's call for stimulus comes after he questioned last week whether rates would need to be trimmed in August.

He said the Bank was ''not a nurse to markets'' and there were no signs that consumers or business were ''panic-struck'' following the Brexit vote.

Since then, he added: "What I said last week is that I would like more information as well as more reflection and I have had more information.

"Although you can't say there's a clear signal, if you spend all the time waiting for a clear signal, it never comes."

His comments follow a report by the Bank's regional agents on Wednesday, which said business uncertainty had ''risen markedly'' since the Brexit vote - but there was ''no clear evidence'' of a sharp economic slowdown.

However, Friday's flash PMI figures painted a different picture of the UK economy, with output and orders falling for the first time since the end of 2012 .

Companies also revealed a gloomy outlook for trade in the latest CBI Industrial Trends Survey on Monday, with business optimism deteriorating at its fastest pace since January 2009.

The MPC will vote on whether or not to slash the cost of borrowing on Thursday August 4.

Interest rates were kept on hold again this month, but Bank governor Mark Carney has signalled in his personal view that a rate cut could come over the summer.

Allan Monks, economist at banking giant JP Morgan, said: " We expect Weale to vote for a rate cut and his comment that 'asset purchases are still likely to be effective' indicates he will also support a QE extension.

"With Weale at the hawkish end of the spectrum, his comments suggest that the majority on the MPC at the Bank will be inclined to use both these policy levers in August."