Bank should not ride to the rescue, says Haldane

THE Bank of England’s chief economist has warned the new government not to expect the “monetary cavalry” to come riding to the rescue if the economy flounders.

Andy Haldane said a “dependency culture” around central banks could develop after a decade of ultra-low interest rates, adding rate-setters should not be “called at the first whiff of grapeshot”.

Mr Haldane, who sits on the monetary policy committee, said he “would be very cautious” about cutting rates “barring some sharp economic downturn” as the City frets over the rising risk of a no-deal Brexit.

“A decade ago, central banks were the only game in town and monetary medicine was the right prescription,” he said while visiting Scunthorpe. “The game has changed and so too might the policy prescription needed in dealing with any downturn,” he warned.

Markets expect top central banks to

‘The game has changed and so too might the policy prescription needed in dealing with any downturn’

cut interest rates and reboot bond-buying programmes as global growth stutters. The European Central Bank and the US Federal Reserve are expected to reduce rates in the coming weeks.

However, Mr Haldane said the challenges facing the economy are based in its total supply rather than demand. Central banks were at the forefront of firefighting the financial crisis through rate cuts and quantitative easing, lifting demand in the economy towards aggregate supply – the total goods and services an economy can produce.

However, investors can no longer rely on central banks closing this gap as “demand is now back in line with supply” in the UK and US. He said fiscal and structural policies from Whitehall are the “right medical prescription” given the most likely economic shocks, such as Brexit and trade warfare, are “radically different”.

“Supercharging the supply-side of the economy is what is now needed”.

Factory orders have had their biggest plunge since the crisis: the overall orders book index in the CBI industrial trends survey fell to minus 34pc.

Across the pond Country-chic retailer Joules says it wants a larger slice of the US market after resilient full-year results. Pre-tax profits rose 14.9pc to £12.9m and sales were up 17pc. International sales, including the US, accounted for only 16pc of Joules’ £218m revenues.