Mark Carney unveiled an “exceptional” package of stimulus, including the Bank of England’s first interest-rate cut in seven years, as policy makers slashed growth forecasts by the most ever after Britain’s decision to leave the European Union. Officials led by the governor voted unanimously to reduce the benchmark by 25 basis points to a record-low 0.25 percent. They split over other elements of the stimulus, which expands the central bank’s balance sheet by 170 billion pounds ($223 billion) with purchases of gilts and corporate bonds, and a lending program for banks. “We took these steps because the economic outlook has changed markedly,” Carney told reporters in London on Thursday. “Indicators have all fallen sharply, in most cases to levels last seen in the financial crisis, and in some cases to all-time lows.”
Carney declared that all of the elements of the stimulus can be intensified, and policy makers said that included taking the rate close to zero if needed. The Monetary Policy Committee’s measures include a plan to buy 60 billion pounds of government bonds over six months, as much as 10 billion pounds of corporate bonds in the next 18 months, and a 100 billion-pound loan program for banks. Should their forecast prove correct, “a majority of members expect to support a further cut in bank rate to its effective lower bound” later this year, they said in a statement.
Sterling is currently being traded around 1.3130 area. Pair is likely to find support around 1.31 handle and resistance above 1.32 area.
Last modified on Thursday, 04 August 2016
