Interest rates could go down, not up, says BoE's chief economist

The Bank of England’s chief economist Andy Haldane has warned that monetary policy may need to be eased rather than tightened in the short term.

In a testimony to the Treasury Select Committee on Tuesday morning, Haldane warned that in light of headwinds from the slowdown in the emerging markets interest rates could be lowered.

“In my view, policy needs to be poised to move in either direction in the period ahead, depending on how the data and risks, domestic and international, play out,” he said.

“When rates do rise, I expect any rises to be both gradual and limited, in line with the Committee’s guidance.”

Haldane added that the risks to the UK gross domestic product and inflation from flagging growth in emerging markets are skewed to the downside, as stated in the November 2015 Inflation Report.

"There are of course also risks to the upside, but I consider these to be both more modest in scale and somewhat easier to cope with should they occur."

BoE governor Mark Carney said it was unlikely that interest rates would turn negative, while Monetary Policy Committee member Gertjan Vielghe suggested that more quantitative easing might make sense.

As of 10:38 the yield on the benchmark 10-year Gilt was off by four basis points to 1.84% while cable was higher by 0.07% to 1.5124.