U.K. Likely to Require Further Stimulus, Says BOE's Shafik
September 28 2016 - 06:00AM
Dow Jones News
The Bank of England will likely have to provide further stimulus
to the U.K. economy to limit an economic slowdown caused by voters'
decision to leave the European Union, Deputy Governor Minouche
Shafik said Wednesday.
The BOE has already responded to the June vote to exit from the
EU by lowering its key interest rate, restarting a program of bond
purchases, and providing loans to banks.
But policy makers have also indicated they expect to do more to
moderate an anticipated weakening of the economy, and Ms. Shafik
made it clear she supports that view.
"It seems likely to me that further monetary stimulus will be
required at some point in order to help ensure that a slowdown in
economic activity doesn't turn into something more pernicious," she
said in a speech in London.
Recent economic data has been mixed, with a series of surveys
suggesting the world's fifth-biggest economy may be bouncing back
from the initial post-referendum slump.
Ms. Shafik acknowledged there has been "little data on which to
base an assessment of how the outlook had changed," but said it is
clear that the economy will grow more slowly over coming years.
"There is no doubt in my mind that the U.K. is experiencing a
sizable economic shock in the wake of the referendum," said Ms.
Shafik, who will leave the BOE in February to run the London School
of Economics. "Any reduction in openness or need to reallocate
resources will necessarily imply a slower rate of potential growth
for the economy."
Whatever the longer-term implications of the vote, Ms. Shafik
said the slowdown hasn't been as "sharp or sudden" as policy makers
had feared, and additional stimulus may not be required as soon as
they had previously anticipated.
"The likely timing of that stimulus will depend on the continued
evolution of the data over the coming weeks and months," she said.
"We will learn a lot from the arrival of more official data for the
post-referendum period, and that will allow us to navigate by
looking out the window as well as down at our radar."
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
September 28, 2016 05:45 ET (09:45 GMT)
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