By David Milliken
LONDON (Reuters) – Bank of England policymaker Gertjan Vlieghe said on Tuesday that the central bank could well need to add more stimulus as risks to the economy had grown in response to rising COVID cases, and voiced some cautious support for negative interest rates.
The BoE has almost doubled its asset purchase programme since the start of the pandemic, to 745 billion pounds ($966 billion), and economists polled by Reuters expect it to announce a further 100 billion pounds of bond purchases on Nov. 5 after its next meeting.
“In my view, the outlook for monetary policy is skewed towards adding further stimulus,” Vlieghe said in a speech published by the BoE.
“Given that virus prevalence has been increasing again recently, it is likely to weigh more heavily on economic activity. Indeed, it appears that the downside risks to the economic outlook are starting to materialise,” he added.
The BoE is also considering whether it is practical and effective to cut interest rates below zero, as the European Central Bank and Bank of Japan have done.
Vlieghe said the BoE had not reached a conclusion on this, but he did not have a fundamental objection and that it was important to look at new ways to support growth.
“My own view is that the risk that negative rates end up being counterproductive to the aims of monetary policy is low,” he said.
“Given how low short-term and long-term interest rates already are, headroom for monetary policy is limited, and we must consider ways to extend that headroom,” he said.
($1 = 0.7710 pounds)
(Reporting by David Milliken and Andy Bruce; editing by Michael Holden)
