No-deal Brexit could bring near-zero rates!

• BoE should make a major change to its forecasting process, says senior official.

The Bank of England might need to cut interest rates almost to zero after a no-deal Brexit, while repeated Brexit delays could also make a rate cut necessary, senior BoE official Gertjan Vlieghe said on Friday.

Vlieghe's comments, in a speech at Thomson Reuters in London, went further than those of other BoE policymakers who have said rates would probably need to fall after a no-deal Brexit shock to the economy, but have not been explicit about the size of such a move.

The prospect of Britain leaving the European Union without a deal has grown after both candidates to become Britain's next prime minister said they would be prepared to lead the country into a no-deal Brexit if necessary.
Vlieghe used most of his speech to argue that the BoE should make a major change to its forecasting process and follow other smaller central banks by setting out its best collective guess about how borrowing costs might change.

He sought to lead by example by spelling out what he thought the BoE should do with its benchmark rate - which currently stands at 0.75 per cent - if Britain were to leave the EU without a deal to cushion the change.

"On balance I think it is more likely that I would move to cut bank rate towards the effective lower bound of close to 0 per cent in the event of a no-deal scenario," Vlieghe, one of nine interest-rate setters at the British central bank, said.