Momentum towards an interest rate cut is growing after a third of members of the Bank of England’s rate-setting committee signalled that the UK economy could need greater support from lower borrowing costs within months.
Policy setter Silvana Tenreyro suggested over the weekend that the central bank may be edging towards a rate reduction, while policymaker Gertjan Vlieghe was reported saying in an interview with the Financial Times that he will vote in favour of a looser monetary policy when the committee meets later this month.
“I really need to see an imminent and significant improvement in the UK data to justify waiting a little bit longer,” Vlieghe said.
Two Bank of England policymakers, Jonathan Haskel and Michael Saunders, have already voted for rate cuts at recent monetary policy committee meetings.
The Bank of England fears that the UK economy will need a boost this year after the economy went into a 0.3% decline in November on the back of weakness in the manufacturing sector, according to official figures from the Office for National Statistics.
Last week, Mark Carney, the governor of the Bank of England, hinted that interest rates could be cut soon.
Carney commented: “If evidence builds that the weakness in activity could persist, risk-management considerations would favour a relatively prompt response.”