MNI POLICY: BOE Vlieghe: UK Underlying Growth Close To Zero

--BOE Vlieghe: Economic Slack Likely Rising

--BOE Vliege: More Stimulus Likely If Brexit Uncertainty Persists

By David Robinson

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

Vlieghe said that the UK's underlying growth rate appeared to be close to zero

and that if Brexit uncertainty persists more stimulus would likely be needed.

     Vlieghe, speaking at a Money and Macro Forum event, also said that more

stimulus would likely be needed if there was a no-deal Brexit.  A Brexit deal

that was able to provide sufficient clarity for business to invest may, however,

be enough to ward off further easing.

     Following are key points from the speech:

     --"A range of ... activity indicators suggest the underlying growth rate of

the economy is now close to zero, with business investment declining outright

and consumption growth slowing," Vlieghe said.

     This near non-existent growth is likely below the economy's potential and

"has a significant impact on the monetary policy outlook."

     --Global economic headwinds from rising trade tensions are weighing on the

UK economy, although he said it was too soon to tell how trade battles will play

out.

     --Against this backdrop the shock of a no deal Brexit "is more likely to

require monetary stimulus than tightening," Vlieghe said but he added that the

policy response would not be automatic. 

     --Similarly prolonged Brexit uncertainty was "likely to keep economic

growth below potential, and require some monetary stimulus."

     --Only "A near-term Brexit deal that reduces uncertainty and gives

businesses adequate time to prepare for any future changes in the UK-EU trading

relationship" might stave off the need for monetary easing. 

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

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