BOE Carney Says Summer Interest Rate Cut Needed

Bank of England Governor Mark Carney said Thursday that growth will slow in coming months and that further cuts in interest rates and other measures will be needed even as he declared his confidence in the U.K.’s ability to successfully adapt to a future outside the European Union.

In advance of the U.K.’s June 23 referendum, the BOE had warned that growth could slow as consumers and businesses responded to heightened uncertainty by cutting spending. In a speech to business people and bankers, Mr. Carney said that was now the bank’s expectation.

Mr. Carney said it was his personal view that the central bank would need to cut its key interest rate “over the summer,” adding that an initial assessment of the economic damage would be made at the Monetary Policy Committee’s July meeting, and a “full assessment” alongside new forecasts for growth and inflation in August. That suggests he favors an August move, while leaving the door open to an earlier decision.

He added that the BOE has a range of other tools with which to support the economy and support the banking system, a hint that a revival of its bond buying program is possible, while he noted that the Financial Policy Committee—which sets the rules for banks—could take action when it meets Tuesday. However, he once again noted the disadvantages of cutting the key interest rate below zero, which he warned could “perversely” reduce the availability of credit.

via WSJ

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza