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MNI BRIEF: Consumption May Sag Despite Rate Cuts - BOE Greene

BOE MPC member Megan Greene writes about the risk of a lagging consumption rebound
Bank of EnglandGlobalCentral Bank NewsPolicy NewsHomepageCEEMEABriefUKStoryRegion

MNI (LONDON) - Many UK borrowers are on fixed rate mortgages and the full impact of higher interest rates is still being felt and this may mean that a consumption rebound will lag despite policy rate cuts, Megan Greene, independent Bank of England Monetary Policy Committee member said in an op-ed in the Financial Times Monday.

Greene, echoing her recent comments in a Newcastle speech, said that there were upside and downside inflation risks as policy easing feeds through and that she believed "a cautious, gradual approach to monetary easing is appropriate" although she made clear that if the primary impact of monetary policy came through its impact on household finances there were clear downside risks. "If the biggest factor is the impact of rates on household incomes, recovery could take much longer.  While households have already seen much of the benefit from greater interest on savings, the full impact of higher interest rates on mortgage payments has not yet passed through," she said.

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MNI (LONDON) - Many UK borrowers are on fixed rate mortgages and the full impact of higher interest rates is still being felt and this may mean that a consumption rebound will lag despite policy rate cuts, Megan Greene, independent Bank of England Monetary Policy Committee member said in an op-ed in the Financial Times Monday.

Greene, echoing her recent comments in a Newcastle speech, said that there were upside and downside inflation risks as policy easing feeds through and that she believed "a cautious, gradual approach to monetary easing is appropriate" although she made clear that if the primary impact of monetary policy came through its impact on household finances there were clear downside risks. "If the biggest factor is the impact of rates on household incomes, recovery could take much longer.  While households have already seen much of the benefit from greater interest on savings, the full impact of higher interest rates on mortgage payments has not yet passed through," she said.

Keep reading...Show less