BANK OF ENGLAND ACTION – “TIMELY, COHERENT AND COMPREHENSIVE”

Governor Mark Carney has outlined the reasons behind the latest package of monetary measures in response to Brexit and the expected economic downturn, describing them as “timely, coherent and comprehensive”.  The reduction of Bank Rate to a historic low of 0.25%, the increase in QE, the introduction of a new lending scheme and the buying of corporate bonds are all designed to ensure that lower rates will be passed on in full to bank customers and clients. Mr Carney made much of the shock that Brexit has produced and that action was needed now even though there is currently a lack of hard data on the pace economic activity in the UK. He was also firm in his desire to ensure that lower rates will indeed be passed on.

The outlook for Bank Rate is for another cut before the end of the year but the Governor was adamant that negative interest rates were not appropriate for the UK at this time and repeated his personal view that he does not like negative rates.

Crucially the next important event will be the Chancellor’s Autumn Statement because as the Governor stated, although monetary policy is nimble, it can only do so much within the MPC’s remit and the real stimulus must now come from government.

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