Bank of England Governor Mark Carney dropped a clear hint on Thursday that the central bank could cut interest rates if it looks like weakness in the economy will persist. His comments sent sterling to a near two-week low against the dollar as he outlined a debate on the Monetary Policy Committee about whether interest rates needed to be cut now.
Last month and in November, two of the nine policymakers on the BoE’s interest rate-setting committee voted to cut interest rates to 0.5% from 0.75%, though Carney himself backed keeping rates on hold. Britain’s economy slowed to a crawl late last year, and many indicators of the economy remain downbeat despite signs of optimism among businesses and consumers following Prime Minister Boris Johnson’s landslide win last month.
On asset purchases, Carney said there was room to “at least double” the BoE’s 60 billion pound ($78 billion) stimulus package of August 2016, a sum that will increase further as more government bonds are issued over time. Carney also noted reasons why the BoE might not cut interest rates, citing signs that global growth is stabilizing and ongoing tightness in Britain’s labor market. The rest of his speech focused on possible changes to the BoE’s inflation targeting framework, which he said had served Britain well.