BoE will not recommend position on Brexit

Tuesday, Mar 08 2016

Bank of England (BoE) governor Mark Carney reiterated that the British central bank would not make a recommendation on the referendum scheduled for June 23 that would decide if the U.K. remains in the European Union (EU) or decides to leave the group, commonly referred to as “Brexit”, but that he would ensure actions to mitigate any short-term effects to financial stability.

Testifying in front of the U.K. Treasury Committee on the topic of economic and financial costs and benefits of membership in the EU, Carney insisted on Tuesday that his institution would not take a position on the Brexit issue or make any type of recommendation for the vote. The BoE governor did note however that at EU deal could improve stability of the banking union which he insisted would definitely help financial stability in the U.K. On a similar note, BoE deputy governor Jon Cunliffe said that the EU renegotiation deal was significant and that parties recognized the need to separate non-euro zone countries from those belonging to the monetary union.

“Non-euro zone countries will continue to regulate their own banks,” he confirmed. BoE takes steps to backstop banks around referendum date. Carney repeated in Tuesday’s session that the central bank had not included the possibility of Brexit into its forecasts. “We have not prepared an analysis for that and we have no intention of providing an analysis for that,” the stated.

However, Carney did admit that the BoE could work to mitigate secondary economic effects with respect to financial stability. Indeed, the BoE announced on Monday that it had added three additional Indexed Long-Term Repo (ILTR) operations in the weeks around the EU referendum. The intention of the ILTRs is to ensure the availability of liquidity to banks, building societies and broker dealers. These three additional operations will take place on June 21, 24 and 28, in comparison to the June 23 referendum date.

Sterling is currently being traded few points above 1.4210 level. Pair is likely to find support around 1.4150 handle and resistance above 1.4250 level. There will be no major data releases later today.

Source: Investing.com

More in this category: « German Industral Production rose by 3.3% Australian Home Loans down by 3.9% »