–Says Cut To Zero Or 0.25% Would Harm Position Of Certain Banks
LONDON (MNI) – Cutting Bank Rate would generate ‘perverse effects’
and weaken the financial position of certain banks, Bank of England
Monetary Policy Committee Member Martin Weale said today.
In an interview in French newspaper, Les Echos, Weale – who is
described as a member of the ‘hawkish camp’ by the paper – also says
that the recent rise in sterling’s exchange rate was a concern.
“Lowering short-term rates (Bank Rate is currently 0.5%) to zero or
to 0.25% might generate perverse effects, such as weakening the
financial position of certain banks,” Weale said.
While there was a debate going on in the MPC about increasing its
quantitative easing programme further, Weale said:
“At this stage, my personal opinion is it’s not necessary to
increase the size of the asset purchase programme.”
Weale said that while there was a “theoretical limit to the size
of such a (QE) programme” – “there was “no practical limit at the
present moment”.
While inflation is “not a major problem” for Weale, he admitted
that “we are paying careful attention to it” and he notes the rise in
petrol price and also food price pressures after the US drought.
The euro zone remains the number one risk for the UK economy, Weale
says.
The problems of the euro zone are an important source of tension
for the UK economy and the rise in sterling against the euro is a worry
for him:
“The rise in sterling is a concern for me. Because of that the
economy has lost some of its competitiveness,” Weale said.
–London Bureau +20 7862 7499; dthomas@marketnews.com
[TOPICS: MT$$$$,M$X$$$,M$$FI$,M$$BE$]
