Britain fires with both barrels - emergency rate cut and budget boost

[snoop1130]

Britain fires with both barrels - emergency rate cut and budget boost

By David Milliken, Paul Sandle

 

A woman, wearing a protective face mask, walks in front of the Bank of England, following an outbreak of the coronavirus, in London, Britain March 11, 2020. REUTERS/Henry Nicholls

 

LONDON (Reuters) - The Bank of England slashed interest rates by half a percentage point on Wednesday and announced support for bank lending just hours before the unveiling of a budget splurge designed to stave off a recession triggered by the coronavirus outbreak.

 

In what amounts to a choreographed double-barrelled stimulus programme, the BoE announced its unanimous emergency rate cut as London markets were opening and before Prime Minister Boris Johnson’s government sets out its spending plans after midday.

 

Mark Carney’s parting shot as governor, which returns the main interest rate to a record low of 0.25%, comes as COVID-19, the flu-like infection caused by the virus, spreads rapidly, stoking fears of global recession and roiling markets.

 

“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 told reporters after the first rate reduction since August 2016.

 

“This is a big package. It’s a big package. It is a big deal,” Carney said, adding that the BoE’s package was equivalent to “north of 1%” of economic output. He said the Bank was coordinating with the government to have “maximum impact”.

 

The Bank acted, Carney said, after seeing a “sharp fall” in trading conditions in the last week, particularly in the retail sector and anything driven by discretionary spending. Britain’s economy flat-lined in January, data showed.

 

Bank Rate is now back to the record low it reached after 2016’s Brexit referendum.

 

The cut in borrowing costs follows a similar move from the U.S. Federal Reserve last week, and was the first such action to take place outside the British central bank’s normal schedule since the global financial crisis of 2008.

 

“There is no reason for this shock to turn into the experience of 2008 and a virtual lost decade in a number of economies if we handle it well,” Carney said.

 

His successor, Andrew Bailey, added: “It’s a totally different discussion from what we were having a decade ago.”

 

“MAXIMUM IMPACT”

 

Finance minister Rishi Sunak is due to present his first budget shortly after 1230 GMT, which is expected to include more healthcare funding to fight the coronavirus, as well as further economic stimulus.

 

Sterling briefly sank against the dollar by almost a cent on the news but recouped its losses and as of 0908 GMT traded at around $1.293, its level before the BoE cut rates. Yields on longer-dated British government bond yields rose sharply.

 

The BoE did not announce any new quantitative easing bond purchases, but did lower its counter-cyclical capital buffer for banks to zero and launched a new scheme to support lending to small businesses — both measures to keep borrowing flowing.

 

The BoE said it would allow banks to release a special store of capital, known as the counter-cyclical capital buffer, so they can continue lending to households and businesses during the coronavirus epidemic. Tapping the buffer means that lending up to 190 billion pounds can be supported, equivalent to 13 times banks’ net lending last year.

 

Shares in Lloyds Banking Group, HSBC, Royal Bank of Scotland and Barclays rose by up to 3% in early trading.

 

 

Bailey said British banks would withstand the coronavirus shock.

 

QE POWDER DRY FOR NOW

 

“Much like the Fed move we saw earlier, it’s a case of making sure that you get out there on the front foot,” Investec economist Vicky Clarke said. “They haven’t done anything on the QE front so there’s still that possibility to pull that lever if they need to.”

 

The U.S. Federal Reserve and the Bank of Canada lowered rates last week, and the European Central Bank is expected to take action on Thursday.

 

“Temporary but significant disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies,” the BoE said.

 

Asked about the 2008 crisis towards the end of his news conference, Carney said that was a completely different situation, when central bankers cut rates across the globe at one point just to get through to the next weekend.

 

“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’re in a different place. This is not about making it to a weekend.”

 

-- © Copyright Reuters 2020-03-11

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[Admiral Hornblower]

Meanwhile, in Thailand...............

[Logosone]

Excellent work by Mark Carney and superb presentation.

 

But cheaper lending alone will not revive the English patient.

 

The UK has the largest oil sector in the EU, which employs 300,000 people and accounts for some 20% of corporation tax.

 

With oil prices low in the long term the UK economy will take hit here.

 

Due to Brexit 1.7 trillion GBP have left the City already, more will follow. With passporting and equivalence in doubt and at the mercy of EU regulators and courts many UK services providers will face a tough time.

 

Foreign investment in the UK has fallen dramatically since Brexit was voted for.

 

Big name firms from Honda to Siemens to JP Morgan have made clear they will set up elsewhere.

 

Even without coronavirus the UK was in dire shape, now, with the oil crisis the UK is in a worse position still. Very tough times ahead for the British,

 

[Logosone]

Let us spare a thought for UK Health minister Nadine Dorries who contracted.....coronavirus.

 

Ostensibly at a government event hosted by the Prime Minister.

 

https://www.bbc.co.uk/news/uk-51827356

 

 

[Chomper Higgot]

1 hour ago, Logosone said:

Let us spare a thought for UK Health minister Nadine Dorries who contracted.....coronavirus.

 

Ostensibly at a government event hosted by the Prime Minister.

 

https://www.bbc.co.uk/news/uk-51827356

 

 

So there’s some hope then.

[evadgib]

This Corona lark will be gone by June & ???????? thankfully will continue as planned.

[from the home of CC]

Just saw a podcast of the UK health prep numbers, and with a half a million in old age facilities its a challenge. From what I saw they're leaps ahead of N. America but the presenter said that if the public doesn't become involved and responsible (with upcoming social restrictions) it can't work and the health service will become overwhelmed. I wish Canada was getting as well prepared.

[Kwasaki]

2 hours ago, Chomper Higgot said:

So there’s some hope then.

Not according to Mr Grim Reaper Logosone. ????

[sandrabbit]

3 hours ago, Logosone said:

Big name firms from Honda to Siemens to JP Morgan have made clear they will set up elsewhere.

Honda are cutting back on carbon based internal combustion automotive production and are making Japan their electrical production centre looking after Japanese workers, don't quote stuff like this which has nothing to do with Brexit but a huge re alignment of their business. Same with Ford at Bridgend, the workers knew the contracts for the manufacture of engines was coming to an end and new contracts might have come about if the switch to electrical propulsion hadn't occurred so fast. 

[billd766]

I gave up on listening to Mark Carney years ago although I am glad that he has gone. IMHO it was a pity he stayed so long.

[Kwasaki]

1 minute ago, billd766 said:

I gave up on listening to Mark Carney years ago although I am glad that he has gone. IMHO it was a pity he stayed so long.

Yeah agree bloody foreigners. ????

[Logosone]

1 hour ago, evadgib said:

This Corona lark will be gone by June & ???????? thankfully will continue as planned.

At the latest, I wouldn't be surprised if it's gone by April or May. 

 

But haven't we seen the UK already going on as before? The chancellor today unveiled a budget which increases UK borrowing by 125 billion £. The Brexiters are getting the children of the UK to pay for their policies. Generations of British will pay for this budget. 

 

The Greeks did the same, live on credit, and let the generations after us deal with it.

 

And btw, oil prices will still be low after June. For years. The UK has the second largest oil sector in the EU. But unlike Norway no sovereign wealth fund to cushion the impact for 270,000 employees employed in the oil sector. And what about the 20% of corporation tax the oil sector pays? Ah, I forgot continue as planned, ie let other generations pay for it...

 

Edited March 11, 2020 by Logosone

[sandrabbit]

1 minute ago, Logosone said:

The Brexiters are getting the children of the UK to pay for their policies. Generations of British will pay for this budget. 

And what did labour do under Blair, get their great grandchildren to still pay for what they did ............

[Logosone]

24 minutes ago, sandrabbit said:

Honda are cutting back on carbon based internal combustion automotive production and are making Japan their electrical production centre looking after Japanese workers, don't quote stuff like this which has nothing to do with Brexit but a huge re alignment of their business. Same with Ford at Bridgend, the workers knew the contracts for the manufacture of engines was coming to an end and new contracts might have come about if the switch to electrical propulsion hadn't occurred so fast. 

Of course, they only made electrical cars in the UK.

 

Must be the reason why JP Morgan, Bank of America and Chase are going opening huge new offices in Paris.

 

Toyota and BMW also made clear they are leaving the UK if the trade deal is not good.

[sandrabbit]

1 minute ago, Logosone said:

Of course, they only made electrical cars in the UK.

?

 

 

[Logosone]

4 minutes ago, sandrabbit said:

And what did labour do under Blair, get their great grandchildren to still pay for what they did ............

Blair squandered the mobile phone licence windfall, 29 billion £. But then the Tories squandered 79 billion £ from the privatisation windfall.

 

Who squandered the billions from the north sea oil and failed to set up a sovereign wealth fund like Norway?

 

Who called for a referendum and took the UK out of the largest single market it was ever in?

 

The poor decisions made by UK leaders, they cut across party lines and go on for many decades.

Edited March 11, 2020 by Logosone

[sandrabbit]

3 minutes ago, Logosone said:

Toyota and BMW also made clear they are leaving the UK if the trade deal is not good.

Threats, UK biggest market for BMW products outside of Germany. Toyota made their money and want to run same as Ford & GM did in the UK and will lose customers.

 

Financial institutions always threaten and cut and run, they have no interest in people.

[sammieuk1]

The both barrels shot down the sniveling pound yet again ????

[Logosone]

6 minutes ago, sandrabbit said:

Threats, UK biggest market for BMW products outside of Germany. Toyota made their money and want to run same as Ford & GM did in the UK and will lose customers.

 

Financial institutions always threaten and cut and run, they have no interest in people.

Nah, the biggest markets for BMW outside of Germany are the USA and China.

 

https://www.statista.com/statistics/267252/key-automobile-markets-of-bmw-group/

 

[sandrabbit]

9 minutes ago, Logosone said:

Who called for a referendum and took the UK out of the largest single market it was ever in?

I think the largest single market the UK was in the was the world going back just over a 100 years ago.

[samran]

1 minute ago, sammieuk1 said:

The both barrels shot down the sniveling pound yet again ????

Sing it with me lads:

 

’it’s gold, it’s round, one dollar to the pound, Engerland, Engerland...’

[samran]

1 hour ago, evadgib said:

This Corona lark will be gone by June & ???????? thankfully will continue as planned.

If it is a lark, then the chancellor is wasting a bunch of cash then...

[Roadman]

2 hours ago, Logosone said:

At the latest, I wouldn't be surprised if it's gone by April or May. 

 

But haven't we seen the UK already going on as before? The chancellor today unveiled a budget which increases UK borrowing by 125 billion £. The Brexiters are getting the children of the UK to pay for their policies. Generations of British will pay for this budget. 

 

The Greeks did the same, live on credit, and let the generations after us deal with it.

 

And btw, oil prices will still be low after June. For years. The UK has the second largest oil sector in the EU. But unlike Norway no sovereign wealth fund to cushion the impact for 270,000 employees employed in the oil sector. And what about the 20% of corporation tax the oil sector pays? Ah, I forgot continue as planned, ie let other generations pay for it...

 

Financial logic says borrow when lending rates are low so I don’t see an issue there. And having been through heavy borrowing for re direction of my own country years ago with that debt now gone I don’t see an issue there. The more interesting observation in the case of Britain is whether one thinks, and I do, it is a better financial decision to borrow as she is doing to plot her new direction at her own expense versus the huge yearly financial drain she would be paying for ever in support of the EU hind tit sucklings. I know I would rather invest in the interest of my own for future return on that investment foremost.

Edited March 11, 2020 by Roadman

[soalbundy]

8 hours ago, Kwasaki said:

Yeah agree bloody foreigners. ????

Rishi Sunak, sounds like a good old British name from the fields of Summerset

[Logosone]

7 hours ago, Roadman said:

Financial logic says borrow when lending rates are low so I don’t see an issue there. And having been through heavy borrowing for re direction of my own country years ago with that debt now gone I don’t see an issue there. The more interesting observation in the case of Britain is whether one thinks, and I do, it is a better financial decision to borrow as she is doing to plot her new direction at her own expense versus the huge yearly financial drain she would be paying for ever in support of the EU hind tit sucklings. I know I would rather invest in the interest of my own for future return on that investment foremost.

 

Yes, that was certainly the logic Greece applied. We saw how well that ended. Financial logic says don't borrow too much. We saw with Greece that creditors don't tolerate endless borrowing. Eventually they stop financing countries that live above their means. 

 

Ramping up borrowing for a country like the UK that is already among the most indebted countries in the world is the road to disaster. 

 

Rating agencies have consistently downgraded the UK over the last few years.

 

The EU was not a huge financial drain for the UK, who will have to pay exactly the same figure it paid in EU membership fees  only disguised as tariffs in return for exporting  to the EU, as it still wants to and needs to do. After all the EU "hind tit sucklings" bought 66% of all the fish British fisheries caught and supplied 100% of some food stuffs. After all it was the open border and free passporting rights that allowed the City' to become so attractive for international banks. The UK for all its hatred of the EU massively benefitted from the EU, and its membership was the best investment it ever made.

 

Yes, the UK should have invested in its own future. It should have set up a sovereign wealth fund from its north sea oil windfall, like Norway. It never did. The privatisation windfall of othe 80s? The mobile phone licences windfall? All blown in the wind, for lower taxes to allow successive incompetent UK governments to stay in power. This budget, once again, is not an investment in the UK, it's a freebie handout to UK taxpayers to ensure this government can get re-elected. Like all the previous tax handouts British governments were so fond of giving the British public will merely invest this one in its absurdly overpriced housing market. It's what happened with all the other freebies.

 

 

 

Edited March 12, 2020 by Logosone

[vinny41]

19 minutes ago, Logosone said:

 

Yes, that was certainly the logic Greece applied. We saw how well that ended. Financial logic says don't borrow too much. We saw with Greece that creditors don't tolerate endless borrowing. Eventually they stop financing countries that live above their means. 

 

Ramping up borrowing for a country like the UK that is already among the most indebted countries in the world is the road to disaster. 

 

Rating agencies have consistently downgraded the UK over the last few years.

 

The EU was not a huge financial drain for the UK, who will have to pay exactly the same figure it paid in EU membership fees  only disguised as tariffs in return for exporting  to the EU, as it still wants to and needs to do. After all the EU "hind tit sucklings" bought 66% of all the fish British fisheries caught and supplied 100% of some food stuffs. After all it was the open border and free passporting rights that allowed the City' to become so attractive for international banks. The UK for all its hatred of the EU massively benefitted from the EU, and its membership was the best investment it ever made.

 

Yes, the UK should have invested in its own future. It should have set up a sovereign wealth fund from its north sea oil windfall, like Norway. It never did. The privatisation windfall of othe 80s? The mobile phone licences windfall? All blown in the wind, for lower taxes to allow successive incompetent UK governments to stay in power. This budget, once again, is not an investment in the UK, it's a freebie handout to UK taxpayers to ensure this government can get re-elected. Like all the previous tax handouts British governments were so fond of giving the British public will merely invest this one in its absurdly overpriced housing market. It's what happened with all the other freebies.

 

 

 

The only person that is stating as a fact that the UK will have to pay exactly the same same figure it paid in EU membership fees  only disguised as tariffs in return for exporting  to the EU,

Can you please provide a link to support this statement or should we assume it's FAKE NEWS and you have just made it up

PS  if the UK chooses to import nothing from the EU how many jobs will go in Germany 100,000 or 300,000

[evadgib]

9 hours ago, samran said:

If it is a lark, then the chancellor is wasting a bunch of cash then...

There's another budget in October...

[Henryford]

Carnage couldn't resist a last attempt to rubbish the Pound.

[martin3]

34 minutes ago, Logosone said:

 

Yes, that was certainly the logic Greece applied. We saw how well that ended. Financial logic says don't borrow too much. We saw with Greece that creditors don't tolerate endless borrowing. Eventually they stop financing countries that live above their means. 

 

Ramping up borrowing for a country like the UK that is already among the most indebted countries in the world is the road to disaster. 

 

Rating agencies have consistently downgraded the UK over the last few years.

 

The EU was not a huge financial drain for the UK, who will have to pay exactly the same figure it paid in EU membership fees  only disguised as tariffs in return for exporting  to the EU, as it still wants to and needs to do. After all the EU "hind tit sucklings" bought 66% of all the fish British fisheries caught and supplied 100% of some food stuffs. After all it was the open border and free passporting rights that allowed the City' to become so attractive for international banks. The UK for all its hatred of the EU massively benefitted from the EU, and its membership was the best investment it ever made.

 

Yes, the UK should have invested in its own future. It should have set up a sovereign wealth fund from its north sea oil windfall, like Norway. It never did. The privatisation windfall of othe 80s? The mobile phone licences windfall? All blown in the wind, for lower taxes to allow successive incompetent UK governments to stay in power. This budget, once again, is not an investment in the UK, it's a freebie handout to UK taxpayers to ensure this government can get re-elected. Like all the previous tax handouts British governments were so fond of giving the British public will merely invest this one in its absurdly overpriced housing market. It's what happened with all the other freebies.

 

 

 

At least we don,t have to live with the rules they make anymore,It may take a long time and maybe its going to hurt for a long time,But I'm sure you wouldn't want other countries making laws and rules for you?

A lot of men and women and children died to be free in both world wars.....EU maybe good for the smaller countries,But I'm glad we are out! 

[englishoak]

If the Uk is going to make unprecedented changes which is badly needed and build on infrastructure now is the time to do it. Its a good move, a very good move. Rates are almost zero and decoupling from EU regs means a lot more can be done immediately as required. 

 

For the first time in 40 years no 10 is instep with no 11 and the BOE is  on board with the best new Governor it could have, a lifelong and very highly rated, hugely BOE experienced patriot... Carney is all but gone and just taking orders now, he has no choice but to do as told,... He will be gone by summer, just going through the motions now.  

 

Budget gets a thumbs up from me, very ambitious and positive, thats what was needed. 

Edited March 12, 2020 by englishoak