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The Bank of England (BoE) may cut interest rates in the near future if the uncertainty around Brexit continues, according to economist Michael Saunders, who is a member of the Monetary Policy Committee (MPC).
In a speech, Mr Saunders said that confusion over Britain’s exit from the EU has ‘hurt business confidence’. The BoE is also concerned about headwinds from a potential global economic slowdown, he added.
Mr Saunders, who has previously pushed for rate hikes, now says a cut ‘may be necessary’.
In his speech, he said: ‘If the UK avoids a no-deal Brexit, monetary policy also could go either way and I think it is quite plausible that the next move in Bank Rate would be down rather than up.
‘One scenario is that Brexit uncertainty falls significantly and global growth recovers a bit. In this case, some further monetary tightening (limited and gradual) is likely to be needed over time.’
He said that the high level of Brexit uncertainty is broadly based across industry sectors. The three sectors reporting the highest levels of uncertainty are wholesale and retail, which is most reliant on EU imports; accommodation and food, which is the largest user of EU migrant labour; and manufacturing, which is the biggest exporter to the EU.
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