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BoE's Vlieghe says UK may need negative rates to recover - Bloomberg

·1-min read
FILE PHOTO: Gertjan Vlieghe, BoE Monetary Policy Committee Member speaks at Newsmaker at Reuters

LONDON (Reuters) -The Bank of England may need to ramp up its stimulus programme including a possible cut in interest rates below zero for the economy to recover fully from its coronavirus slump, policymaker Gertjan Vlieghe said, according to Bloomberg.

Vlieghe has previously said he sees few risks that negative interest rates would be counterproductive.

But other BoE officials are more doubtful and there was no mention of the topic in the minutes of the BoE's most recent policy meeting published on Thursday when the central bank kept its key lending rate at 0.1%.

"Once we talk about adding significant stimulus to the economy, then the rate cut we can do without going negative is obviously very small," Vlieghe told Bloomberg in an interview on Friday.

"The risk it ends up being counterproductive is low, and therefore if we find ourselves in circumstances where we need more stimulus, that would be a risk I’m willing to take."

Sterling and British government bond yields fell after the comments were published.

Vlieghe said the coronavirus hit to investment and jobs and Brexit - "whether there is a deal or not" - might mean an economic recovery peters out earlier than hoped

If markets are calm but demand is weak enough to justify more stimulus, a combination of more asset purchases and probably lower rates would be needed, he said, echoing recent comments by fellow policymaker Michael Saunders.

(Reporting by David Milliken; Editing by William James and Andrew Cawthorne)