LONDON (Reuters) - The Bank of England’s next move may be to cut interest rates rather than raise them, because of the risk of persistent low inflation and an emerging market crisis that could hurt world growth, its chief economist Andy Haldane said on Friday.

Pedestrians walk past the Bank of England in the City of London May 15, 2014. REUTERS/Luke MacGregor

Recent data suggested Britain’s economy would slow in the second half of the year and inflation might remain too low, while emerging market troubles could drag on growth, he said.

Haldane’s speech comes less than a day after the U.S. Federal Reserve held off from raising interest rates, blaming weaknesses in the global economy that concern the BoE too.

“The balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside,” Haldane said in a speech to businesses in Northern Ireland.

The case for raising interest rates was “some way from being made”, he added.

“Were the downside risks I have discussed to materialise, there could be a need to loosen rather than tighten the monetary reins as a next step to support UK growth and return inflation to target.”

Haldane flagged the possibility of cutting rates below their record-low 0.5 percent in March, but has not persuaded other policymakers.

The Bank of England undertook additional policy loosening by buying 375 billion pounds of British government bonds between 2009 and 2012 and has since reinvested the proceeds of maturing bonds.

The BoE as a whole is edging closer to an interest rate hike, but voted 8-1 this month to keep them on hold. Fears of a hard landing in China and general weakness in emerging markets have prompted investors to defer bets on the timing of a British rate hike.

Sterling inched down after the speech but bond markets were broadly unchanged.

“Everyone knows that he is probably the most dovish member of the committee, probably by some margin,” Andy Chaytor, strategist at Nomura said.

GLOBAL HEADWINDS

Britain’s strong domestic economy would partly offset external risks but it too was showing signs of slowing, Haldane said, citing softer employment and surveys of manufacturing and construction output.

Meanwhile, a 1 percent fall in emerging market growth could shave 0.5 percent off global and British growth over two years, with Britain’s banking sector a channel for contagion.

“We may now be entering the early stages of ... the ‘Emerging Market’ crisis of 2015 onwards,” he said. “It is simply too soon to tell how potent contagion from emerging market economies to the world economy will be.”

Haldane said central banks needed to consider the risk that interest rates might remain persistently lower and they should “think imaginatively” about possible solutions such as raising their inflation targets or making bond-buying programmes a permanent part of their policy tools.

A third “and perhaps most radical and durable option” would be to charge a negative interest rate via a state-issued digital currency, he said.