BoE: no rush in raising interest rates; cost of Brexit

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Bank of England chief economist Andy Haldane stated that there is “no rush” in increasing interest rates to levels last seen in the past.

Andy Haldane, who is currently a member of the central bank’s monetary policy committee stated that additional policy tightening is possible, however, it would not be as aggressive as expected. The MPC is in charge of managing interest rates.

Haldane stated on a visit to the north eastern part of England, that rates are maintaining their position and are comfortably in their lowest levels and that these said levels are there to back up the economy.

He also further stated that they are rigorously monitoring inflationary developments as these indications are currently ahead of their target. This is the main reason on why the BoE increased rates once already.

In November, the Bank of England increased rates for the first time in ten years. The monetary policy committee voted to allow the rate to remain at 0.5 percent, however, it indicated a more hawkish tone.

On Brexit news, the reported average cost which was estimated at 10 percent or so is not considered as a “hit to growth”, instead, it is the possible decline in the level of output within the span of 15 years in comparison with the country staying in the European Union.

The output reduction of 10 percent through a 15 year span is considered as a “hit” to the growth rate of under 0.5 percent per annum, which is well within the margin of error, thus taking no account of compensatory domestic policy.

The economic policy of austerity, which has been deemed unnecessary, has been pursued over the past few years. This policy has damaged the UK’s growth rate than any other of the Brexit scenarios.

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