Monetary Policy Provides Only Temporary Relief for the UK: BoE’s Haldane, According to Reuters

LONDON (Reuters) – The chief economist of the Bank of England stated on Sunday that monetary policy can only provide a “short-term remedy” for the uncertainties surrounding Britain’s economy following the decision to leave the European Union.

Andy Haldane emphasized that the Monetary Policy Committee is fully aware that it cannot shield the UK from the long-term repercussions of June’s Brexit decision, as expressed in an opinion piece published in the Sunday Times.

His remarks align with a prevailing view among economists that the British government will need to introduce a new fiscal strategy in the autumn to stabilize the economy in the face of the impending EU exit.

“This represents a structural change in the UK’s economic and trading landscape, while monetary policy can only serve as a temporary solution to economic uncertainty,” Haldane noted, stating that the outcome has created a “dust cloud” of doubt over the economy.

“More fundamentally, monetary policy cannot address other structural issues within the UK economy — such as regional, socio-economic, inter-generational, and housing disparities,” Haldane added.

In a recent poll, more than two-thirds of economists forecasted that the government would implement a “significant” fiscal stimulus to support the economy.

Despite inconsistent indicators suggesting that consumer spending has remained relatively strong since the EU referendum, business surveys are indicating the most severe decline in corporate activity since the recession of 2008/09.

Earlier this month, the Bank of England reduced interest rates to a historic low of 0.25 percent and reinstated its bond purchase program in response to evidence that the economy has notably slowed since the referendum.