The volatility in the UK’s economy is evident amidst the ongoing events of Brexit. Analysts are increasingly getting wary of whether the December 2020 deadline would be sufficient for the United Kingdom and the European Union to strike a broader trade deal. In times of uncertainty that is weighing on the economy at large, the Bank of England (BoE) has already started a discussion regarding the potential pros and cons of a rate cut in the upcoming weeks.
Gertjan Vlieghe Sees The Need Of A Rate Cut Amidst The Economic Instability
Gertjan Vlieghe of the BoE was reported stating on Sunday that in light of the instability in the UK’s economy, he has decided in favor of monetary policy leniency and will be voting for a rate cut later this month. The policymaker also highlighted that the recent economic data is suggesting a need for further stimulus to boost the country’s economy.
Vlieghe’s comments, however, are not the first that hint at an imminent rate cut from the Bank of England. The recent developments have been highlighting the prospect of monetary policy leniency from the BoE in the upcoming weeks. BoE’s Governor, Mark Carney, stated himself in the past week that if the economic weakness extends into 2020, the chances of a rate cut from the Bank of England at the end of January would be higher than previously thought.
BoE’s Silvana Tenreyro To Favor Rate Cut If The UK’s Economy Doesn’t Pick Up
Another prominent policymaker, Silvana Tenreyro, also commented on Friday and expressed her plans of voting in favor of a rate cut in the next few months if the UK’s economy fails to lift up. The country’s economy started to lose traction in 2016 after the first referendum for Brexit. Towards the end of 2019, the economy was seen losing pace at a rate that marked historically high. While PM Johnson’s victory in the UK’s general election on December 12th had lifted the sentiment, the optimism wasn’t sustainable and was lost back soon thereafter.
According to Vlieghe, a clearer insight into the economy’s current state will be available to the policymakers by the end of this month. The results of the business and household surveys in the upcoming weeks, he added, will contribute to making an informed decision about the monetary policy later this month.
GBP/USD failed to keep above the crucial 1.3100 level in the last week again as it closed at 1.3058 on Friday.