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Bank of England press conference after interest rates cut - live updates Bank of England rate cut send pound sliding, but shares soar - live updates
(35 minutes later)
3.44pm BST
15:44
Campaigners who argued, in vain, for Britain to stay in the European Union are arguing that their warnings have been proved accurate.
Chuka Umunna MP, Chair of Vote Leave Watch, says:
“It’s clear that quitting the European Union has been a hammer-blow for working people across Britain. Thanks to the impossible promises of Vote Leave Tories like Boris Johnson, David Davis and Liam Fox people around the country will face job losses, higher prices, and falling pay packets – while they enjoy a promotion and sit around the cabinet table.
“The promises of Tory Leavers that Brexit would lead to higher growth and more jobs have never seemed so hollow. The myths told by senior figures in Theresa May’s new government will result in working people being worse off. They need to be held to account for the damage they have done to our economy.
3.26pm BST
15:26
Three months ago, the Bank of England had expected the UK’s jobless rate to keep falling. Not any more...
Thanks, Brexiteers. pic.twitter.com/AmxVak80Uo
Updated
at 3.27pm BST
3.21pm BST
15:21
From the City, Conner Campbell of SpreadEx explains how the markets have reacted to today’s news:
Well it looks like the Bank of England certainly delivered, at least from the market’s points of view, satisfying both parts of its ‘Super Thursday’ moniker for the first time since the title’s inception.
So, to the nuts and bolts of what the central bank announced this afternoon: a unanimous decision saw the headline interest rate cut from 0.5% to 0.25%, while everyone but Kristin Forbes voted for up to £10 billion in corporate bond purchases. The most controversial step was the £60 billion expansion (to £435 billion) of the current Q3 programme, an expansion opposed by Forbes, Ian McCafferty and Martin Weale. The MPC also unveiled a new £100 billion ‘term funding scheme’ designed to encourage banks to lend.
Carney claimed that there was a ‘clear case’ to act now, with the week’s woeful PMIs joined by fresh forecasts from the BoE that 250,000 people stand to lose their jobs post-Brexit. The Bank also now expects the UK economy to grow by a meagre 0.8% next year (against the 2.3% previously estimated), with inflation set to jump to 0.8% in 2016 and 1.9% in 2017.
The news saw the markets behave just as you would expect; the FTSE surged 1.4%, climbing back above 6700 in the process, while the pound plunged by the same amount against both the dollar and the euro. What is interesting, however, is that this still leaves both instruments within the same trading brackets they have been bouncing around for the last few weeks, reflecting, perhaps, the extent to which today’s action from Carney and co. was expected. It also doesn’t necessarily give either the UK index or sterling any fresh direction for the coming weeks and months, leaving both at the mercy of the next wave of Brexit-impacted data.
3.20pm BST
15:20
Barclays is passing today’s interest rate cut onto mortgage customers in full.
It says:
“Customers with Barclays Bank Base Rate Tracker mortgages and customers on the Barclays Standard Variable Rate will see their rates reduce by 0.25%.
We will provide advance notification to those customers whose mortgage payments will change.”
But the bank is also hinting that savers will take a hit.....
“Our savings rates are currently under review following the reduction to the Bank of England Base Rate. Once a decision has been made, we will contact the relevant customers to let them know what the changes mean for them, providing appropriate time for them to consider their options before changes come into effect.”
3.11pm BST
15:11
Hammond: Bank is protecting the economy from Brexit process
Chancellor Philip Hammond has told Sky News that today’s stimulus package should mean fewer people lose their jobs in the months ahead, as the Brexit process unfolds.
Hammond says:
We are determined to build an economy that works for everyone. Right now we are trying to protect jobs and economic growth.
The measure that have been taken today are designed to ensure that any increase in unemployment as a result of the economic slowdown is kept to the absolute minimum possible.
And to support economic growth through the next 18 months, two years, as we face this period of uncertainty as we negotiate our exit from the European Union.
2.56pm BST2.56pm BST
14:5614:56
Here’s our news story about how two of Britain’s biggest banks haven’t, yet, agreed to pass on today’s rate cut in full:Here’s our news story about how two of Britain’s biggest banks haven’t, yet, agreed to pass on today’s rate cut in full:
Mortgage lenders delay moves to pass on interest rate cut https://t.co/0kxZRg2MpFMortgage lenders delay moves to pass on interest rate cut https://t.co/0kxZRg2MpF
2.50pm BST2.50pm BST
14:5014:50
Larry Elliott, our economics editor, says Mark Carney has taken an “all action” approach to fighting a Brexit-induced recession.Larry Elliott, our economics editor, says Mark Carney has taken an “all action” approach to fighting a Brexit-induced recession.
[The Bank] was slow to react to the great recession of 2008 and 2009, and was not going to be accused of making the same mistake twice. The risks of doing nothing were higher than the risks of providing oodles of fresh stimulus.[The Bank] was slow to react to the great recession of 2008 and 2009, and was not going to be accused of making the same mistake twice. The risks of doing nothing were higher than the risks of providing oodles of fresh stimulus.
The backdrop to the four-part package is the assumption that there is going to be a marked slowdown in activity as a result of the 23 June referendum. Recession is avoided, but only just and only because the Bank’s nine-strong monetary policy committee (MPC) assumes that lower interest rates, a new scheme to encourage commercial banks to pass on lower borrowing costs and £70bn worth of additional money creation will boost activity over the coming months and years.The backdrop to the four-part package is the assumption that there is going to be a marked slowdown in activity as a result of the 23 June referendum. Recession is avoided, but only just and only because the Bank’s nine-strong monetary policy committee (MPC) assumes that lower interest rates, a new scheme to encourage commercial banks to pass on lower borrowing costs and £70bn worth of additional money creation will boost activity over the coming months and years.
Related: This is the Bank of England's all-action response to BrexitRelated: This is the Bank of England's all-action response to Brexit
2.40pm BST2.40pm BST
14:4014:40
If you’re just tuning in, here’s our news story about the Bank of England’s historic rate cut:If you’re just tuning in, here’s our news story about the Bank of England’s historic rate cut:
Related: Bank of England cuts interest rates to 0.25% and expands QERelated: Bank of England cuts interest rates to 0.25% and expands QE
Here’s our explanation about quantitative easing - one of the four pillars of today’s stimulus package.Here’s our explanation about quantitative easing - one of the four pillars of today’s stimulus package.
Related: Quantitative easing: all you need to knowRelated: Quantitative easing: all you need to know
And here’s our Q&A about the rate cut:And here’s our Q&A about the rate cut:
Related: UK interest rate cut: how it will affect youRelated: UK interest rate cut: how it will affect you
2.26pm BST2.26pm BST
14:2614:26
UK borrowing costs hit record lowsUK borrowing costs hit record lows
UK government bonds are also soaring, following the news that the Bank of England will buy another £60bn of gilts.UK government bonds are also soaring, following the news that the Bank of England will buy another £60bn of gilts.
This has driven down the interest rate on 10-year gilts down to 0.68%, from 0.78%.This has driven down the interest rate on 10-year gilts down to 0.68%, from 0.78%.
That means the UK government can borrow cheaper than ever before - making it a great time to borrow to invest.....That means the UK government can borrow cheaper than ever before - making it a great time to borrow to invest.....
2.23pm BST2.23pm BST
14:2314:23
Shares surge, but pound slumps.Shares surge, but pound slumps.
The London stock market has surged since the Bank of England announced its new stimulus package.The London stock market has surged since the Bank of England announced its new stimulus package.
The FTSE 100 index has jumped by 97 points, or 1.5%. Financial stocks are leading the rally, with Aviva up 7%, Standard Chartered up 5.3%, and Prudential gaining 3.5%.The FTSE 100 index has jumped by 97 points, or 1.5%. Financial stocks are leading the rally, with Aviva up 7%, Standard Chartered up 5.3%, and Prudential gaining 3.5%.
And the smaller FTSE index, which is more focused on the UK economy, has gained 1.3%.And the smaller FTSE index, which is more focused on the UK economy, has gained 1.3%.
The pound continues to slide, though; sterling has lost two whole cents against the US dollar to $1.314.The pound continues to slide, though; sterling has lost two whole cents against the US dollar to $1.314.
That’s a chunky fall, but still higher than immediately after the Brexit vote.That’s a chunky fall, but still higher than immediately after the Brexit vote.
£/$ drops on #BankofEngland stimulus, but still not at previous low. Median analyst estimate for yr-end = $1.27 pic.twitter.com/8tacMa34aD£/$ drops on #BankofEngland stimulus, but still not at previous low. Median analyst estimate for yr-end = $1.27 pic.twitter.com/8tacMa34aD
2.10pm BST
14:10
Lloyds Banking Group also hasn’t decided whether to pass on today’s rate cut in full.
It says tracker mortgages *will* be cut, but it hasn’t decided what to do about its standard variable rate.
Here’s the statement:
The Bank of England base rate is only one of a number of factors that we take into account when reviewing interest rates. The 0.25% reduction will form part of the ongoing rate reviews across our product ranges. All variable rate products that track the Bank of England base rate will be reduced by 0.25% from September.
Updated
at 2.16pm BST
1.49pm BST
13:49
Santander says it is passing the interest rate on to customers in full:
From the beginning of September 2016, Santander’s Standard Variable Rate will be 4.49%.
The Alliance & Leicester Standard Variable Rate on mortgages will also be reduced by 0.25% to 4.74%.
1.45pm BST
13:45
Jill Treanor
Mark Carney’s stern warning to Britain’s banks to pass on today’s rate cut may have fallen on deaf ears at Royal Bank of Scotland.
Even as the Bank of England governor was telling reporters that there is ‘no excuse’ not to pass the cut on, RBS - bailed out by the taxpayer in 2008 - was quick to announce it had not decided whether to do so yet.
Its NatWest arm has 17% of its customers on standard variable rate [SVR] mortgages. Here’s the statement:
The Bank of England base rate has reduced today from 0.5% to 0.25%.
Existing NatWest customers with Fixed Rate products will not see a change in their rate during their fixed rate period.
We are currently reviewing whether we will make any changes to Variable Rate products and will provide an update in the near future.
For those customers on Base Rate Linked products, we will reduce their rate by 0.25%.
1.37pm BST
13:37
And that’s the end of Mark Carney’s press conference. I’ll pull a summary together shortly.
Former chancellor George Osborne has already given his verdict:
BoE right to use triple whammy of lower official rates, QE & funding scheme to support demand.But only a temporary answer as economy adjusts
Must be matched by permanent supply side reform:lower biz taxes, free trade with EU & unambiguous message we're open to overseas investment.
Updated
at 1.41pm BST
1.34pm BST
13:34
Carney: Can't imagine how helicopter money would help
Q: What’s your view of helicopter money? [IE, trying to stimulate the economy by handing cash directly to the public].
Mark Carney deploys his most dismissive tone, saying he doesn’t see the merit in the idea...and “cannot conceive” a situation where such a “flight of fantasy” would help the UK.
Carney now channelling Meghan Trainor's No on negative interest rates. 'have been abt as clear as I can be on that' pic.twitter.com/HHSmcp8ReH
1.31pm BST
13:31
Q: Can Mark Carney reassure investors about his commitment to steering the UK economy through the troubled times ahead, by promising to stay until 2021?
[Background: Carney signed up to a 5-year term in 2013, but could potentially serve eight years].
Carney says it’s an “absolute privilege” to serve at the Bank of England. But he’s been working flat out for months, and hasn’t had a moment to reflect on the issue.
1.27pm BST
13:27
Broadbent: House prices expected to fall next year
Q: What is the Bank of England’s forecast for house prices?
Deputy governor Ben Broadbent says any fan chart on house price would be as wide as any other fan chart it produces (ie, it doesn’t really know).
But the central case is that house prices experience a “small decline” next year, but then pick up again as average wages rise.
1.23pm BST
13:23
Ben Chu of the Independent tries to bowl Mark Carney out with a great question.
He reminds the governor that he was criticised for forecasting a recession if Britain voted to leave the EU, because his forecasts didn’t include a post-Brexit stimulus programme (as we’ve seen today). So, does today’s announcement vindicate them?
Carney plays a straight bat (ice hockey stick?), pointing out that the Bank’s ‘fan charts’ show a range of possibilities for growth (including a recession).
Carney not totally ruling out recession. doesn't use r-word but says ppl can look at fan charts, see what may happen beyond the central case
Updated
at 1.23pm BST
1.23pm BST
13:23
1.18pm BST
13:18
Carney repeats that banks have ‘no excuse’ not to pass today’s interest rate cut onto customers.
He adde that he doesn’t want to see UK bank deposit rates fall below zero.
Quote of day from Mark Carney: “Banks have no excuse for not passing on this rate cut” We may hear one or two excuses in the coming days