MNI POLICY: BOE Haskel Says Still Prefers Rate Cut Now

By David Robinson

     LONDON (MNI) - Bank of England Monetary Policy Committee member Jonathan

Haskel said firms' increasing shift to intangible assets may be making it harder

for them to supply collateral against loans, contributing to a lower equilibrium

interest rate and supporting the case for monetary easing now to move away from

the zero lower bound.

     The problems firms face in borrowing push up risks spreads, and make them

more vulnerable to changes in financial conditions, Haskel said in a speech at

the University of Nottingham on

     Haskel has recently voted for a 25 basis point rate cut, including at the

January meeting.

     The "low interest rate environment we find ourselves in, reinforced by the

trend towards intangible assets that I have discussed today, in part informs my

recent votes on the MPC, where limited conventional monetary policy space means

I continue to prefer to move now in order to ensure we achieve a sustainable

return of inflation to target," he said.

     He said that the spread of intangibles may be playing a part in the common

problem of central banks facing low inflation despite high employment.

     "One angle is that intangible investments - directly through investment in

process and indirectly through increased scalability - have brought about an

increased scope for variable capacity utilisation and in so doing have flattened

the short run relationship between aggregate demand and inflation," he said.

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

[TOPICS: M$B$$$,M$E$$$,M$$BE$]