Interest rates could be cut to Zero – BOE’s Haldane

FXStreet (Mumbai) - Bank of England (BOE) chief economist Andrew Haldane, in his speech at a business club in Rutland, said that policymakers may be forced to cut interest rates to zero in the coming months to tackle the looming risk of deflation.

Haldane said, “On the MPC’s central view, inflation will remain close to zero in the near-term, before rising to reach the inflation target over a two-year horizon. The risks to inflation at that horizon are plainly two-sided. But my personal view is that these risks are skewed to the downside In my view, that means policy needs to stand ready to move off either foot in the period ahead.”

He further added, “One insurance device comes from the specification of the inflation target itself. Even if the risks to inflation are asymmetric, central banks’ inflation targets typically are not. This reduces the risk of monetary policy imparting a “deflationary bias”. The MPC’s own mandate is crystal clear: deviations above and below the 2% inflation target are to be treated symmetrically.”

Haldane's comments could be responsible for a fresh drop seen in the GBP/USD pair to 1.4747 levels