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Bank of England press conference after cutting interest rates - live updates Bank of England press conference after cutting interest rates - live updates
(35 minutes later)
12.49pm BST 1.23pm BST
12:49 13:23
Q: You’re not forecasting a recession next year - is that because of the new stimulus package? Ben Chu of the Independent tries to bowl Mark Carney out with a great question.
Carney confirms that the Bank expects only limited growth in 2017, but not a recession. 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?
Today’s package means the Bank has “improved the economic prospects of the country”,and should mean unemployment is lower and growth is stronger than would otherwise be the case. 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).
12.47pm BST 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
12:47
Onto questions, starting with the Financial Times...
Q: You’ve said that monetary policy can only mitigate the impact of Brexit, so what should the government do?
Carney says that the government has already identified the areas that need to be addressed, such as boosting productivity. Monetary policy cannot tackle structural problems in an economy.
12.47pm BST
12:47
12.45pm BST
12:45
At presser, @bankofengland's Carney says majority of MPC supports another cut to "lower bound" if economy continues as projected #Brexit
After UK rate cut BoE's Carney hints more to come: "All elements in this package have scope to be increased"
12.44pm BST
12:44
Carney: We could cut rates further
All of the elements in this package can be increased, Mark Carney declares.
Interest rates could be cut further, the £100bn funding for lending scheme could be increased, as could the QE and corporate bond purchase scheme.
And then he reveals that a majority of MPC members would support a further rate cut, if the forecasts in today’s inflation report are accurate.
12.42pm BST
12:42
Carney: We've launched a timely, coherent and comprehensive package
Today’s package of measures are “timely, coherent and comprehensive”, says Mark Carney.
Half of all mortgages are on floating rates, as are four-fifths of bank loans, so the cut in interest rates will be felt immediately.
The Bank of England is also determined that the stimulus gets to the real economy, rather than being diluted through the financial sector.
Carney says the new term funding scheme designed to ensure the base rate cut not diluted as it passes through the financial system
Buying corporate bonds will ease the funding cost of UK companies, he continues.
And buying more government bonds through QE will drive down bond yields, and push investors towards riskier assets (as they’ll get an even smaller return on UK gilts).
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at 12.46pm BST at 1.23pm BST
12.40pm BST 1.23pm BST
12:40 13:23
The Bank of England is expecting Britain’s unemployment rate to rise to 5.5% by 2018. 1.18pm BST
Unemployment to rise from 4.9 to 5.5 per cent in next 2 years - Carney. 13:18
This is more than BOE Governor Carney, this is Statesman Carney Carney repeats that banks have ‘no excuse’ not to pass today’s interest rate cut onto customers.
12.37pm BST He adde that he doesn’t want to see UK bank deposit rates fall below zero.
12:37 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
Mark Carney says the Bank is aiming to “reduce uncertainty, and blunt the slowdown” caused by the Brexit vote. 1.16pm BST
But monetary policy has its limits, he warns. And the fall in sterling will not fully offset the “substantially weaker” private sector demand. 13:16
12.35pm BST Q: Did you only cut interest rates by a quarter-point because you wanted a unanimous decision?
12:35 Carney says the Bank didn’t cut rates deeper, because it was also able to provide stimulus in other ways.
You can watch Mark Carney’s press conference online here (right-click to open in a new tab). If the economic data continues to deteriorate, a further rate cut is possible in the months ahead.
It’s also being streamed on Sky News and BBC News. 1.13pm BST
12.34pm BST 13:13
12:34 Carney has drawn the battle lines -- with savers on one side, and the unemployed on the other.
BoE Press conference begins Carney puts the unemployment rate into numbers. 'That's more than a quarter of a million ppl losing their job"
Governor Mark Carney’s press conference is starting now. 1.12pm BST
He begins by touching on the Brexit vote, saying: 13:12
The UK can handle change. It has one of the most flexible economies in the world. It has a deep reserve of human capital.... and its people are admired the world over for their strength under adversity. Q: What do you want small savers to do with their money?
Carney confirms that the Bank has cut interest rates to record lows, boosted its asset purchase scheme by £60bn, decided to start buying up to £10bn of corporate bonds each month, and created a new £100bn funding for lending scheme. Carney sweeps aside the idea that the Bank of England is treating savers unfairly.
He than warns that: Despite this stimulus package, the Bank expects unemployment to rise by 250,000, so it is right to take action now, the governor declares.
The economic outlook has changed markedly.... and are consistent with the risks which the MPC saw before the vote. Should we have more people lose their jobs, to target a different part of the economy?
Should we have more uncertainty?
We understand the challenge the UK faces... this package lessens the challenge.
Carney: more than a quarter of a million people are now forecast to lose their jobs
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1.08pm BST
13:08
Q: What’s your message to critics who say this package is excessive?
This is the appropriate response to the conditions that the UK economy finds itself in, Carney replies. There is a “clear case” to act now, when the economy needs it.
Ben Broadbent, deputy governor, then takes the mike. He points to the latest Markit PMIs, which suggest the economy is now contracting. So it is “not premature” to act now.
1.05pm BST
13:05
Asked about the Brexit vote, Mark Carney says that Britain has suffered a “very large” shock.
Risks are now manifesting themselves in a wide range of indicators, he adds.
Carney says post referendum "an unusual situation" when asked to put it in context. "It's a very large identifiable supply shock"
1.01pm BST
13:01
Our economics editor, Larry Elliott, asks Carney about calls for the UK government to boost its infrastructure spending.
Carney says he has discussed various policy actions with chancellor Philip Hammond, and the Treasury is “fully informed” about the Bank’s thinking, and what it can do to support the economy.
12.57pm BST
12:57
Carney fires a warning shot at the banking sector - they have ‘no excuse’ not to pass this rate cut on. So, expect mortgage rates to fall.
Carney: the banks have no excuse not to pass this rate cut on. They should write to their customers and make that clear
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12.57pm BST
12:57
Q: Could the Bank of England cut interest rates to negative in future?
Carney agrees that he’s not a big fan of negative interest rates. Other stimulus options are better.
The BoE still thinks that the ‘zero lower bound’ is just above zero, he adds (meaning rates couldn’t be cut below 0.0%)
Carney asked if we can rule out Negative rates. "I am not a fan of negative interest rates... We have other options to provide stimulus"
12.55pm BST
12:55
Q: What’s your message to savers, who must look at today’s decision and wonder if it’s worth putting any money aside?
We think about this all the time, Carney says. But he offers little immediate relief:
Saving rates are probably going to be low for some time, both in the UK and beyond.....
That’s the price of protecting the economy, the governor adds:
We will ensure for savers, for pensioners, for pension funds.. that the economy will grow, that there are fewer unemployed, and we adjust to this new equilibrium faster than would be the case.
Carney's message to savers "Think about a lot, worked hard, done right thing, returns will be low for sometime.."
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12.53pm BST
12:53
Q: Funding constraints aren’t a big problem today, so why have you allocated £100bn to encourage bank lending?
Carney says it’s important to take worries about credit availability off the table. Firms and households should not face the credit constraint suffered after the 2008 financial crisis.