The market turmoil in the UK requires a “significant monetary response,” says the BoE’s chief economist

The UK government’s fiscal easing “will require a significant monetary response,” the Bank of England’s chief economist said on Tuesday, while signaling the central bank does not expect to act before its next scheduled meeting in November.

At a conference in London a day after sterling hit an all-time low against the dollar, Huw Pill said the monetary policy committee was “certainly not indifferent” to the asset repricing seen since last week as Chancellor Kwasi Kmacheng a laid out “growth plan” focused on large, unfunded tax cuts.

He stressed the combined effect of the government’s new fiscal stance, the “significant” reaction in markets and the broader context of rising interest rates elsewhere in the world. “All of this will require a significant financial response,” he said.

But he resisted calls from some investors for an emergency rate hike to shore up the currency and restore confidence in Britain’s macroeconomic outlook.

Market moves need to be seen in the context of other recent developments, including in fiscal policy but also in energy and labor markets, he said. The best way to conduct this “necessarily comprehensive assessment” would be when the BoE updates its forecasts to inform its policy decision in November, he said.

“In my view, the combination of financial announcements that we’ve seen will act as a demand stimulus,” Pill said, stressing that that doesn’t necessarily reflect the view of the other eight MPC members.

While the government is focused on generating growth, the BoE is concerned about persistent inflation and is poised to hike interest rates to dampen demand and curb inflation. The market turmoil in the UK requires a “significant monetary response,” says the BoE’s chief economist

Adam Bradshaw

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