"How far can you cut BBR? Can you go to negative BBR? These are questions that are being discussed now."
Speaking at FSE Cardiff today, Sinclair said: “The big question is what next for the Bank of England and the MPC. It is really caught on the horns of two issues – whether it protects the value of sterling or it controls inflation.”
Discussing what it might decide to do with the Bank Base Rate, Sinclair added: “How far can you cut BBR? Can you go to negative BBR? These are questions that are being discussed now. The MPC will have to make decisions in July, August and September about continued quantitative easing and the direction of BBR. Normally it wouldn’t want to make decisions within those months at all.”
In terms of the direction of BBR Sinclair stressed that the decision could go either way. “For the first time in possibly six or seven years there is total uncertainty about what the next movement might be,” he said. “What I can say is that it is highly unlikely that we will see BBR back to levels such as 3% in any timescale I can see.”
He also raised concerns that the lack of political leadership following the EU referendum vote last week was exacerbating the problems that currently exist.
Sinclair said: “I hope our political leaders take better control of the situation than they have already. A political vacuum, like we have at the moment, creates greater problems.”
He also said that for the mortgage market there has essentially been little change and that the wider economy and political situation wouldn’t change significantly until Article 50 had been invoked by the Government
He said: “ Housebuilders, despite their share prices taking a battering, still want to build; the big lenders still want to lend money. In our world that will not change although we may see consumer confidence change and it’s up to us, as advisers, to deal with consumers and reassure them.”
Given the short space of time since the UK voted to leave the EU, Sinclair also said it was difficult to provide a clear view on how the economy might be impacted, and the direction the mortgage and housing markets would eventually take.
“At the moment we have no new data, and (in terms of leaving the EU) no plan,” he said. “I don’t think it will get as bad as people think it will though. Also, from my perspective not having to deal with unelected bureaucrats within the European Commission who are not responsible to anyone, is helpful.”
