Carney May Lower B-of-E Rate for Stimulus
CBJ — Bank of England Governor Mark Carney said the central bank would probably need to pump more stimulus into Britain’s economy over the summer after the shock of the decision by voters to leave the European Union.
“In my view, and I am not prejudging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer,” he said.
Carney, who has previously warned of a possible recession in Britain if it chose to leave the EU, said the BoE’s Monetary Policy Committee would announce an initial assessment of the situation on July 14, after its next scheduled meeting.
That would be followed by a full assessment when the Bank updates its forecasts for the economy on Aug. 4.
“In August, we will also discuss further the range of instruments at our disposal,” Carney said.
Investors already largely expect the Bank to cut interest rates over the summer, taking them below their already record low of 0.5 percent to possibly as low as zero.
They also think the BoE might ramp up its bond-buying program under which it amassed a stockpile of 375 billion pounds ($499.58 billion) worth of government debt after the financial crisis.
The yield on 10-year British government bonds fell below 1 percent for the first time earlier this week and was trading at close to that level earlier on Thursday.
Sterling fell to a 31-year low against the dollar last week but remains down about 10% compared with before the referendum. Investors face an uncertain political outlook after Prime Minister David Cameron said he would resign after losing the vote, putting more emphasis on the BoE’s response.