BoE's Cafferty says more easing possible if weak surveys prove correct
The Bank of England might need to loosen policy further, should the signals from various economic surveys prove to be well-founded, a top-ranking official said, sending the pound duly lower.
Ian McCafferty, a Bank of England policymaker, voted against the central bank's decision on 4 August to buy more government bonds, a practice known in markets as 'quantitative easing'.
In remarks to The Times, McCafferty, one of the more erstwhile policy hawks at the Old Lady on Threadneedle Street, said Bank should pursue a more gradual approach when providing support to the British economy after the Brexit vote.
At its 3 August meeting, the Monetary Policy Committee cut Bank Rate for the first time in seven years, to 0.25% from 0.5% and topped up its quantitative easing programme.
McCafferty, who was one of the three committee members to vote against quantitative easing, wrote in The Times that: “If the economy proves to have turned down in line with the initial survey signals, I believe that more easing is likely to be required, but that can easily be delivered in coming months".
The central banker said that until the BoE is more certain of the balance between lower growth and rising inflation a loosening of policy risked pushing inflation above target.
On that occassion, the MPC also revised its growth forecasts for 2017 and 2018 and said it now expected inflation to rise past the 2% target in 2018 and 2019.
He added: "Bank rate can be cut further, closer to zero, and quantitative easing can be stepped up. But until we know with more certainty what we face, I prefer to learn as we go."
According to McCafferty, in the past weak survey data had gone on to prove itself a "false friend".
His remarks weighed on cable which was 0.31% lower at 1.3000 as of 17:34 BST, alongside a three basis point drop on the benchmark 10-yaer Gilt to 0.58%.