The Bank of England’s interest rate cut to 0.25% in August should be enough to prevent the economy from slipping into a recession, according to the most hawkish member of the central bank’s interest rate-setting committee.
Kristin Forbes said Britain had avoided the predicted economic shock following the vote to leave the European Union and should recover without the need for a cut in rates to nearer 0%.
“The economy is experiencing some chop, but no tsunami,” she said, adding: “The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction.”
Forbes, a member of the monetary policy since July 2014, is a professor at the Massachusetts Institute of Technology and considered an expert on financial crises. She backed a cut in interest rates in August from 0.5% to 0.25% after the economy appeared to stumble afterthe Brexit vote, but she refused to back a £60bn expansion of the bank’s quantitive easing programme and moves to buy riskier corporate bonds. At the time she said she was “particularly concerned about excessive stimulus at this stage”.
