Bank policymaker favours rate cut over more easing

Mr Weale said he did not see a case for further monetary stimulus “at the moment”, echoing his comments to French newspaper Les Echos on Thursday.

Mr Weale said in another newspaper interview: “If it were clear that the interest rate could be reduced ... without finding some banks got themselves into a position where they had to reduce lending because of the effects of an interest rate cut on their profits (and) if it were clear a reduction in interest rates would be like all other reductions in the interest rate, I think I would probably prefer that to more QE, if I was choosing between them.

“I am very comfortable with the view that we need to establish whether the effects of an interest rate reduction would be positive before we might do it.”

In the interview with Les Echos, Mr Weale said he did not think it was necessary to extend QE at this stage. He also told Les Echos: “Cutting short-term interest rates to zero or to 0.25 per cent could produce perverse effects, such as weakening the financial position of certain banks – the interest rates on their deposits – or money market funds. In his remarks yesterday, Mr Weale added that he thought the recently announced Funding for Lending Scheme would have a “reasonably powerful effect”.

On Thursday, it was revealed that The Bank of England’s efforts to boost the economy may have hit many pension funds. Its quantitative easing (QE) programme has increased total household wealth by 16 per cent, or £600bn, by increasing the value of assets. But it is the richest households – holding around 40 per cent of these assets – that have benefited the most, according to the Bank.

Its report into the impact of its £375bn QE programme found that pension funds with hefty shortfalls will have seen their deficits increased further. However, the Bank said QE has helped the UK avoid an even worse economic battering. The report comes in response to the Treasury Select Committee’s request for more detail on the effects of QE after increasing criticism of the programme because of its impact on pension annuity rates and gilt yields. The Bank rejected fears that QE was hurting pensioners, saying that while it has lowered annuity rates, it has also increased the value of assets in pension pots.