The level of stimulus in the U.K. economy is sufficient and a further cut in the Bank of England's key interest rate could be counterproductive, BOE rate-setter Ben Broadbent said Monday.
Broadbent, who for the past three months has voted to leave the size of the bank's bond-buying program unchanged at GBP325 billion, said despite weakness in the economy there isn't a strong case for further bond purchases.
"As to whether it's sufficient at the moment, yes it is," he said, referring to the size of the bank's stimulus program.
"That's why I voted not to change policy in each of the last three meetings."
Broadbent was answering questions following a speech at financial information firm Bloomberg LP's London offices. In his address, he stressed that rate-setters are ready to respond to any "extreme outcomes" to the euro-zone debt crisis with further stimulus.
The International Monetary Fund said earlier this month the BOE should loosen monetary policy in the U.K. further, perhaps by cutting its key rate, known as bank rate, below 0.5%, where it has been since March 2009. Broadbent said Monday this could inadvertently hurt the economy, since the profitability of many banks in the U.K. is directly linked to bank rate.
A further cut may hurt banks' earnings and force them to reduce lending, he said.
-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; firstname.lastname@example.org