Bank of England’s Haldane says UK needs muscular monetary policy stimulus in August

A man speaks on his phone outside the Bank of England in London, Britain July 5, 2016. REUTERS/Dylan Martinez/File Photo

LONDON,(Reuters) – The Bank of England needs to act “promptly as well as muscularly” to stimulate the economy and boost confidence, the central bank’s chief economist Andrew Haldane said on Friday.

In his first speech since Britain voted last month to leave the European Union, Haldane said the central bank needed to come up with a “package of mutually-complementary monetary policy easing measures” in time for a rate-setting meeting on Aug. 4.

“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,” he said.

The central bank surprised markets on Thursday when it failed to cut interest rates as expected, with its policymakers instead saying they were likely to come up with a broader package of measures after new economic forecasts next month.

Haldane did not offer any detail on these measures.

Haldane said the central bank should err on the side of responding too aggressively, given potential doubts about the effectiveness of monetary policy at boosting demand when British interest rates are already close to zero.

“I 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 – like another Andy, the one in the Shawshank Redemption,” he said, referring to a film about a prison escape.

Haldane said he expected Britain’s economy to slow materially in the coming quarters, but did not see a crash.

Businesses were more likely to “trim and singe” rather than “slash and burn” hiring and investment plans, he added.

Source: Reuters