LONDON, March 11 (Reuters) – The Bank of England governor Mark Carney and his successor, Andrew Bailey, spoke at a press conference after the central bank unexpectedly cut interest rates by half a percentage point to 0.25% on Wednesday.
Below are the highlights of their comments:
IMPACT OF CORONAVIRUS
“The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large and sharp but should be temporary,” Carney said.
“That’s why the Bank is announcing today a comprehensive and timely package of measures to help UK households and businesses bridge across the economic disruption caused by COVID-19. These measures will help keep firms in business and people in jobs and they will prevent a temporary disruption from causing longer-lasting economic harm.”
ON MONETARY POLICY
“This has been a special meeting, a special action,” Bailey said. “(Monetary policy) will be under constant review and consideration.”
ON 2008 V TODAY
“I was there in 2008, I was part of the co-ordinated interest rate cut, along with the Bank of England and effectively the G10 at the time and let me tell you, we did that to get to the weekend,” Carney said.
“We cut interest rates 50 basis points, co-ordinated, in order to get to the weekend, to get to the G7, G20 meeting and figure out what to do to backstop the system.
“We’re in a different place. This is not about making it to a weekend. It’s not about backstopping the system – we backstopped the system over the course of the last ten years, the system is backstopping itself, that’s why it has resilience.”
IMPACT OF OVERALL PACKAGE
“This is a big package. It’s a big package. It is a big deal to cut the CCYB by as much as the FPC did. It’s a huge term funding certainty for the financial sector, 100 billion at bank rate, with additional incentives and potentially could be substantially increased depending on the lending path of the economy,” Carney said.
“And on top of it there are fiscal measures that are coming. We have direct line of sight of the relevant bits of the budget. That’s part of the coordination.”
ON THE SCALE OF THE STIMULUS
“In terms of the scale of the stimulus there are different ways you can size it…it’s north of 1%,” Carney said.
ON CHANCES OF A RECESSION
“It will pass, the medical situation will pass. With time there will be a vaccine, the spread of the virus will be arrested. We don’t know exactly what that period of time is, nor do the expert epidemiologists, they talk in terms of scenarios and probabilities, quite rightly so,” Carney said.
“We have the resilience in the system that has been built up over a decade that can withstand all of those scenarios.
“(On a recession) It is too early. We have a sense of the direction, a sense of the orders of magnitude, could be large. But it’s a temporary situation and what is important is that a viable business today has the resources and can be bridged so they are viable going forward.”
ON THE MAXIMUM IMPACT
“The Bank is coordinating its actions with those that the Chancellor will announce later today in the budget in order to ensure that our initiatives are complementary and that they will collectively have maximum impact consistent with our independent responsibilities,” Carney said.
ON THE IMPACT ON TRADING CONDITIONS
“We have anecdotal evidence that we’re building up through our agency network and our direct contacts with businesses, where we have seen a sharp fall in trading conditions, particularly in retail, consumer discretionary items over the course of the last week,” Carney said.
“Even prior to that we were beginning to see supply chain disruptions in the manufacturing sector as well.”
ON THE IMPACT ON BANKING SYSTEM
“Such disruption to the economy should have lower impact on the core banking system than the recent stress tests run by the Bank of England have shown the system can withstand,” Bailey said.
“Those stress tests demonstrated that banks would be able to continue to lend to households and businesses even while absorbing the effects of substantial and a prolonged economic downturns, in both the UK and the global economies, as well as falls in asset prices much larger than experienced in recent weeks.”
ON FUTURE ACTION
“In terms of forward looking, I will just note the statement that the bank will take all necessary further actions,” Carney said.
“There is a regular schedule of meetings and the MPC will be meeting again late this month, there’s no change to that, this is a special – this has been a special meeting and a special action but it doesn’t change the schedule in any sense…this will be under constant review and consideration.”
ASKED IF ANYONE AT THE BOE HAS CORONAVIRUS
“No, but we’re as you would expect taking a series of contingency measures that are fully operational: three sites for our critical functions, rotating critical teams including at the governors level so, well, with the deputy governors, with the governor, and ensuring that we have the necessary capacity to take all necessary decisions,” Carney said.
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