UK central bank may add £100bn stimulus

UK central bank policymaker Gertjan Vlieghe said on Tuesday the Bank of England may be required to add more stimulus to the UK economy.

Vlieghe, a member of the central bank’s Monetary Policy Committee, said in a speech published by the BoE: “In my view, the outlook for monetary policy is skewed towards adding further stimulus.”

The UK central bank has almost doubled its asset purchase programme since the start of the coronavirus pandemic — taking it up to £745 billion.

Economists polled by Reuters expect the BoE to add £100 billion more after its November meeting.

Vlieghe added: “Given that virus prevalence has been increasing again recently, it is likely to weigh more heavily on economic activity.

“Indeed, it appears that the downside risks to the economic outlook are starting to materialise.”

The central bank has also been considering whether to cut UK interest rates below zero — as the European Central Bank and Bank of Japan have done.

Vlieghe said the BoE had not reached a conclusion.

“My own view is that the risk that negative rates end up being counterproductive to the aims of monetary policy is low,” said Vlieghe.

“Given how low short-term and long-term interest rates already are, headroom for monetary policy is limited, and we must consider ways to extend that headroom.”