Bank of England's Haskel makes case for 'insurance' rate cut now

FILE PHOTO: Professor Jonathan Haskel, who has just been appointed to the Monetary Policy Committee of the Bank of England, is seen in this undated portrait released by HM Treasury in London, Britain, May 31, 2018. Jason Alden/UK Treasury/Handout via REUTERS

LONDON (Reuters) - The Bank of England should cut interest rates now, rather than risk the British economy slowing to a point where the central bank can do little to help it, policymaker Jonathan Haskel said on Friday.

British economic growth and inflation risk being weaker than the central bank forecast last month, due to the danger of entrenched Brexit-related uncertainties and ongoing trade tensions between the United States and China, Haskel said.

He was one of two policymakers who voted for a rate cut in November and December, and his speech on Friday was the first since he broke with consensus on the BoE’s Monetary Policy Committee.

“The UK economy is near the effective lower bound (ELB) for interest rates,” Haskel said in his speech to the Resolution Foundation think tank in London.

“There is a case to be made for a monetary policy-maker to buy some insurance against falling to the ELB, as central banks are better equipped to combat above-target inflation than below-target inflation when interest rates are close to the ELB,” he added.

The BoE kept its benchmark interest rate unchanged at 0.75% on Thursday, saying it wanted to wait and see how much the election victory of Prime Minister Boris Johnson last week would lift the uncertainty that has slowed the economy.

Reporting by David Milliken; Editing by William Schomberg