MNI POLICY: Haskel: BOE Probing Diverse Rate Cut Pass Through

-Haskel: Risks To Downside Of BOE Economic Scenario

By David Robinson

     LONDON (MNI) - The UK's economic balance of risks are currently to the

downside, but policy remains appropriate, Bank of England Monetary Policy

Committee member Jonathan Haskell said Wednesday, noting that the BOE was

looking into the fragmented pass through from its recent cutting of benchmark

rates to 0.1%.

     "I believe the current stance of monetary policy is appropriate but, on

balance, risks are to the downside," he said.

     He said that if there was a second Covid wave the Bank would respond to the

economic consequences but that it had already built consumer caution, in part

due to health fears, into its latest projections.

     Haskel said that at the June meeting he "readily joined the majority of

colleagues on the MPC in voting for more QE to avoid a tightening of financial

conditions."

     --TERM FUNDING

     The BOE's Term Funding Scheme (TFSME) has had incentives added to it to try

and ensure recent cuts are passed on to small-to-medium sized firms but there is

some evidence that lending rates have not been responsive across the board.

     "We have looked hard at the extent to which our most recent cuts have been

passed on. They have been passed on in some markets, such as floating interest

rate markets, they have perhaps not been passed on in other markets," Haskel

said in a question and answer session at a Brighton Chambers of Commerce event.

     Haskel said that the Bank needed to figure out why there was only partial

pass through from the rate cut. 

     "All I can tell you at the moment is that it is ongoing work that is being

done in as much detail as we possibly can to try and understand the different

markets," he said.

     There has been some speculation among analysts that the Bank could cut the

lowest rate on its TFSME, currently at Bank Rate, to below it but if rate cuts

are not getting through to many borrowers this raises questions about how

effective such a move would be.

     --RISKS NOT BALANCED

     In other remarks Haskel said that the MPC did not place much weight on the

sharp fall in mortgage approvals in itself, but focussed instead on what signal,

if any, approval levels were giving about future demand.

     In his published text Haskel cited the risk of a second wave of Covid 19

infections and stated that, unlike his colleague Chief Economist Andy Haldane,

that he did not believe the risks around the MPC's were balanced, but rather to

the downside.

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

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