BOE’s Broadbent Says It’s Possible More Easing Will Be Needed

(Bloomberg) --

The Bank of England may need to ease monetary policy further to prop up the economy, Deputy Governor Ben Broadbent said, reinforcing economists’ expectations that officials could ramp up bond purchases as soon as next month.

The central bank is keeping all its policy tools under review, including taking the benchmark rate below zero, although that risks doing more harm than good, he said in an interview with CNBC Tuesday.

The comments suggest Broadbent is open to joining his two colleagues on the nine-member Monetary Policy Committee who are already pushing for an additional 100 billion pounds ($120 billion) of bond-buying. The bank kept the program unchanged last week, though Governor Andrew Bailey said in a Bloomberg interview that more could be on the way in June.

Broadbent also pushed back against speculation that the BOE’s asset purchases are entering the sphere of monetary financing, saying that officials are focused on the inflation target and supporting demand.

“As was the case in 2009, you see easing on both the fiscal and monetary fronts,” he said. “That is the connection -- that both are responses to a weak economy. It’s not the case that one is a response to the other.”

The BOE has slashed rates to a record 0.1%, rebooted quantitative easing and introduced new liquidity measures in its attempts to support the economy through a pandemic that has left businesses shuttered and households isolating in their homes. It has also encouraged banks to continue lending, a message reiterated by Broadbent.

“The best thing they can do is to continue lending,” he said. “This isn’t just for the bank’s benefit but for the economy as a whole.”

Officials last week produced a scenario that showed the economy could shrink 14% this year, based on social distancing measures and government support remaining as they are until early June, before gradually being unwound by the end of the third quarter. A new road map out of lockdown outlined by Prime Minister Boris Johnson over recent days is not inconsistent with that, Broadbent said.

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