Friday 12 July 2019 11:05 am | Updated: Friday 12 July 2019 11:38 am

Bank of England could cut interest rates to near zero in no-deal Brexit

LONDON, ENGLAND – JANUARY 25: A taxi drives past the front of the Bank of England in London’s financial district after it was announced that UK economy shrank by 0.2% during the last quarter of 2010 on January 25, 2012 in London, England. The official economic figures, released by the Office for National Statistics, come a day after they calculated that Government debt had risen to an all-time record of 1 trillion GBP. (Photo by Oli Scarff/Getty Images)

Interest rates could be cut to almost zero if Britain leaves the European Union without a deal, a top official at the Bank of England said today.

Gertjan Vlieghe, a member of the Bank’s rate-setting monetary policy committee (MPC), told an audience in London today that Threadneedle Street might have to slash rates to nearly zero in the event of a no-deal Brexit.

The comments mark one of the strongest indications yet given from an MPC member of the potential direction the BoE could take if Britain and the EU failed to reach an agreement by the deadline of 31 October.

Boris Johnson, the bookies’ favourite to succeed Theresa May as the next Prime Minister, has pledged to take Britain out of the EU with or without a deal by the end of October, raising expectations of a potential no-deal exit.

In a speech given at Thomson Reuters, Vlieghe said: “On balance I think it is more likely that I would move to cut Bank Rate towards the effective lower bound of close to zero per cent in the event of a no-deal scenario.”

Sterling remained roughly flat at 1.252 against the dollar.

Vlieghe, who was once a bond strategist at Deutsche Bank, said it was “highly uncertain when I would want to reverse these interest rate cuts”, as it would depend on the rate of recovery from a potential no-deal shock to the markets.

In June the rate-setting committee at the Bank voted unanimously to hold interest rates.

It had raised rates to 0.75 per cent last August from a low of 0.25 per cent.

Yesterday governor Mark Carney refused to be drawn on whether he has his eyes set on the top job at the International Monetary Fund (IMF) after he leaves the Bank in January.

Carney said there were “a few orderly transitions” he had to look after at Threadneedle Street before he focused on anything else.