Cut interest rates to zero

Expert’s call as economy slows

THE Bank of England should consider reducing interest rates to zero, says a former policy chief. Professor David Blanchflower reckons falling shop sales, the slowing economy and fears over Brexit could spell trouble. His intervention comes amid growing expectation the base rate is set to be raised. Prof Blanchflower warned the Bank should “definitely not” do this. He said: “Retail sales and car sales are falling. “The UK has the slowest growth of any G7 country or any of the 28 countries across the EU. Added to that, there is no credible government and no idea what fiscal policy it’s going to have, or what Brexit will look like. “With business investment intentions stalling, I would be thinking of a vote for a cut soon.” Prof Blanchflower, who sat on the Bank’s Monetary Policy Committee from 2006 to 2009, added: “My guess is that, in the next three months, things will worsen as consumer demand falls on the back of falling real earnings.” The Bank’s base rate is already at a record low of 0.25%. A cut would reduce borrowing costs but prove another blow for savers. Three of the eight-member MPC voted this month for a rate rise due to a sharp increase in inflation. In March last year when the base rate was 0.5%, Prof Blanchflower called for it to be cut to zero. Many at the time thought rates would rise. But in the August, with concerns about the fallout from the Brexit vote, the MPC halved the base rate to 0.25%. Bank of England Governor Mark Carney said at the time said there was scope to cut it even further if the economy weakened.

GOVERNOR Mark Carney