MNI POLICY: BOE Haldane's Says Synchronised Easing Unlikely

By David Robinson

     SCUNTHORPE (MNI) - Bank of England Chief Economist Andy Haldane said

differing conditions in advanced economies make synchronised easing by global

central banks less likely in the event of a global shock.

     While the U.S. Federal Reserve and European Central Bank have tilted to

easing, Haldane warned against assuming the BOE would go along the same path.

     He said that the output gap in the UK was closed and that fiscal and

structural policies would be best placed to deal with any Brexit downturn, as

the supply side would take a hit.

     The following are key points from the speech at Scunthorpe Football Club:

     --A decade ago, in the wake of the financial crisis, pumping up aggregate

demand through accommodative monetary policy, was the right policy response,

Haldane said.

     This time around, however, things are different.

     "With the output gap closed in the UK, economic growth and pay rises in

future can no longer rely on monetary policy pump-priming demand. It will

instead require a lasting expansion in the economy's supply potential," he said.

     --Advanced economises are in different places, with the UK facing

idiosyncratic Brexit risks while the pace of growth elsewhere varies and trade

tensions weigh to varying degrees.

     "The very different starting positions of the economy and monetary policy

should give us cause to pause before simply assuming central banks should be

moving synchronously, even when faced by a common global shock," Haldane said.

     --While, for example, the UK has a similarly non-existent output gap as the

U.S., and higher inflation, the key UK policy rate is markedly lower, Haldane

noted.

     "Relative to both the U.S. and the euro area, and its historical past, the

current UK monetary stance looks relatively accommodative," he said.

     The BOE's Monetary Policy Committee is expected to leave policy on hold in

August and Haldane's comments highlight doubts over easing aggressively even if

there is a hefty hit from Brexit.

     --He warned against implied market assumptions that UK policymakers would

move in the same way as the ECB and the Fed.

     "Since the start of the year, UK short-term interest rates have moved in

lockstep with those in the major economies, notably the U.S. and the euro area

... But what stands out, for me, are the differences as much as the similarities

between the UK, U.S. and euro-area economies," Haldane said.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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