BoE External MPC member Gertjan Vlieghe said in speech, even though “policy rates and long-term interest rates are very low… investment is weak, vacancies are low”. Risks to economic outlook are “skewed towards a longer period of labour market slack with weak inflationary pressure”.
Risks to monetary policy stance are therefore “skewed towards additional monetary stimulus.” Addition QE remain an “available policy tool”. But it’s “less potent now than in March, at the height of market disruption and uncertainty.”
Vlieghe said the MPC has also been discussing of the use of negative interest rates. “Growing empirical literature finds that the effect has generally been positive,” he added. “Negative rates have not been counterproductive to the aims of monetary policy. The question for the MPC is “whether there is any reason to think that the UK experience might be different”.
But his own view is “risk that negative rates end up being counterproductive to the aims of monetary policy is low.” Nevertheless, BoE is “not at a point yet when it can reach a conclusion on this issue.”
