Bank Economist Makes Case For UK Rate Cut

The Bank of England's chief economist has outlined the case for cutting the base rate of interest.

Andy Haldane cited low inflation and weaker economic growth, exacerbated by the slowdown in emerging market economies, in a speech to a business audience in Portadown.

"The case for raising UK interest rates in the current environment is, for me, some way from being made," he said.

Mr Haldane added that "there could be a need to loosen rather than tighten the monetary policy reins as a next step to support UK growth and return inflation to target".

Figures released earlier this week showed the annual rate of inflation running at zero - against the bank's target rate of 2% - largely a consequence of falling fuel prices as oil costs remain weak because of low world demand.

It (Other OTC: ITGL - news) is not the first time Mr Haldane has made the argument for a rate cut from its historic low of 0.5%, where it has stood since March 2009.

But his remarks reveal the extent of the divisions on the nine-member monetary policy committee (MPC (KOSDAQ: 050540.KQ - news) ), which sets the rate.

The MPC voted 8-1 earlier this month for no change - with only Ian McCafferty calling for an increase in the rate to 0.75%.

Other members have revealed they are sympathetic to his view that rising wages and a stronger service sector risk building inflationary pressures.

Bank governor Mark Carney has said the case for raising the rate will come in to sharper focus later this year despite risks to the UK economy from the slowdown in China.

The US central bank, the Federal Reserve, cited the weakness in emerging economies as among its reasons for holding off on raising its own rates on Thursday.