Bank of England fights Brexit slowdown with stimulus

[webfact]

Bank of England fights Brexit slowdown with stimulus

 

 

LONDON: -- Britain’s central bank has announced a series of stimulus measures to help protect the economy from the effects of the vote to leave the European Union.

 

They include cutting the benchmark interest rate from 0.5 percent to 0.25 percent and buying more government bonds with newly created money to pump tens of billions of pounds into the economy.

 

“By acting early and comprehensively, the (Bank) can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the UK economy,” Bank Governor Mark Carney told a news conference.

 

Lower growth, higher unemployment

Carney said uncertainty from the Brexit vote will mean less demand, so businesses will cut their output reducing GDP growth and putting people out of work: “The combination of these demand and supply factors means that cumulative GDPgrowth is expected to be 2.5 percent lower by the end of the forecast period than was the case in May. On balance – even after stimulus – the margin of spare capacity is expected to open up and the unemployment rate is expected to rise from its current level of 4.9 percent to around 5.5 percent over the next two years.”

 

The bank’s Monetary Policy Committee (MPC) expects Britain’s economy to stagnate for the rest of this year and suffer weak growth next year while inflation rises.

 

Even though many business surveys indicate Britain’s economy has slowed sharplyand may even be entering recession, it is too early for official data on how the Brexit vote is affecting growth.

 

In response Carney said they will “take whatever action is needed” including boosting the Term Funding Scheme (TFS) a programme to help banks keep lending to businesses and individuals: This timely, coherent and comprehensive package of measures is appropriately sized, given the scale of the shock, uncertainties about the degree of adjustment and the relatively limited data. All of the elements in this package have scope to be increased. The MPC can lower bank rate, increase the size of the TFS and expand the scale or variety of assets held in the asset purchase facility.”

 

Carny said interest rates could come down close to zero but added he was not a fan of negative interest rates.

 

He also rejected boosting the economy though “flights of fancy” such as ‘helicopter money’, which is essentially handing out central bank money with no strings attached.

 

He added commercial banks had “no excuse” not to pass on the BoE’s rate cut to their customers.

 

What is the BoE’s Term Funding Scheme?

The Term Funding Scheme is designed to make sure that the lower levels of interest rates now set by the Bank of England are reflected in the costs commercial banks charge households and companies to borrow money.

 

Eligible institutions will be able to borrow four-year central bank reserves for an initial period of 18 months at rates close to the Bank Rate.

 

The lowest cost of funding, the 0.25 percent Bank Rate, will be for banks that maintain or expand net lending to the economy and the BoE will charge a penalty rate if banks reduce net lending.

 

-- © Copyright Euronews 2016-08-05

[mesterm]

I thought most Brexit supporters said that there will be no negative effects?

[i claudius]

What Carney has done ,did not work in Japan ,it did not work in the E.U ,i has not worked in Britain since 2008 so what do they do , try more of the same , crazy . Carney should have waited 3 months at very least for brexit to calm down and see what happens then , not "panic" straight away /

[rockingrobin]

33 minutes ago, i claudius said:

What Carney has done ,did not work in Japan ,it did not work in the E.U ,i has not worked in Britain since 2008 so what do they do , try more of the same , crazy . Carney should have waited 3 months at very least for brexit to calm down and see what happens then , not "panic" straight away /

The UK 2nd quarter figures for 2016 were astoundingly good when compared to the global climate

[williamgeorgeallen]

interest rates almost at zero and cant be increased back to market adjusted rates or economy goes into freefall. money borrowed and borrowed to stimulate economy. economy suffers under interest repayments for stimulus spending borrowings. interest rates so low many borrow to invest in property and shares causing prices to skyrocket creating a bubble.  this whole system is not sustainable and all it does is transfer money from the lower and middle classes to the extremely rich. 

[peter48]

The chap above ...wait until Brexit calm down..it will not calm down for a very long time. You are talking about untangling 45 years of European contacts, cutting off easy trade with half billion European consumers.  Brexit was an act of self harm committed by the less educated half of UK and Carney tells you the effects... less demand , less out put, less jobs and less tax revenues. The silly Brits listened to UKIP, Boris Bonkers and the isolationists and it will take up to 10 years to sort out. The world knows we are bonkers and the pound fell again yesterday and I regret will fall again and again as that is the globe saying silly Brits leaving 27 other nations like that.

Edited August 5, 2016 by peter48

[12DrinkMore]

16 minutes ago, peter48 said:

The chap above ...wait until Brexit calm down..it will not calm down for a very long time. You are talking about untangling 45 years of European contacts, cutting off easy trade with half billion European consumers.  Brexit was an act of self harm committed by the less educated half of UK and Carney tells you the effects... less demand , less out put, less jobs and less tax revenues. The silly Brits listened to UKIP, Boris Bonkers and the isolationists and it will take up to 10 years to sort out. The world knows we are bonkers and the pound fell again yesterday and I regret will fall again and again as that is the globe saying silly Brits leaving 27 other nations like that.

 

The UK is a net consumer, and has been for a long time. The current account deficit gets larger every month. I am fairly sure that the UK will continue to be able to buy stuff from Europe at normal trade prices provided the UK does not go down the route of putting import taxes on imports from the EU.

 

The UK  trade with EU compared to  non-EU is roughly equal, and not being a member of the EU does not stop Asia exporting to it. As long as the UK can produce stuff that is wanted at a competitive price it will trade. The problem is actually producing stuff, UK manufacturing has being going down the plug hole for a long time as it has become more dependent on "services" rather than hard real goods and agricultural produce.

 

The GBP is falling and probably would have inevitably fallen because of 

 

1. The lowest interest rates since interest rates began. Do you really think that Brexit made much difference? That Canadian has been itching do drop the rates since he arrived on the scene.

 

2. An increasing current account balance.

 

3. An increasing awareness that the "wealth" of the UK is in excessive house prices and bubbled stock market valuations  and not industrial production. Financial services benefits chiefly London only, and I would not rely on those guys to back Britain. If they spot a financial advantange in moving to another place, they will be gone in a flash. 

 

4. Carney and the government want the GBP to fall as it is the only hope left to get exports increasing.

[dick dasterdly]

Sorry to go off-topic, but where is the thread about Cameron's ridiculous honours list?

 

If someone can point me in the right direction, I'd be v grateful.

[Grouse]

Well done Brexiteers!

 

you were right! All the warnings were just scaremongering!

 

45 Baht and 1.31 USD and much further to go

 

Nissan putting all investment in UK on hold pending agreement with EU

 

GS restructuring pending passporting agreement

 

Economy slowing at fastest rate since 2008/9

 

Where are all the Brexit types?

 

run off, that's what!

 

anyway, well done!

[elgordo38]

2 hours ago, williamgeorgeallen said:

interest rates almost at zero and cant be increased back to market adjusted rates or economy goes into freefall. money borrowed and borrowed to stimulate economy. economy suffers under interest repayments for stimulus spending borrowings. interest rates so low many borrow to invest in property and shares causing prices to skyrocket creating a bubble.  this whole system is not sustainable and all it does is transfer money from the lower and middle classes to the extremely rich. 

You are catching on to the rotten system we live in. Spread the message. We serve as nothing but handmaidens for the rich and elite. We are allowed to survive and thrive (only a little bit) to buy their shoddy overpriced products made by cheap labor in foreign countries. Its funny how fast financial markets recovered after the Brexit collapse within a couple weeks they had recouped the 3 trillion lost in stock markets and added a trillion and a half in value. The markets keep making new highs fueled by share buy backs fueled by cheap interest rates the chicanery continues unabated. Prior to 1982 stock buy backs were illegal till the then head of the SEC tweaked the system.  

[Khun Han]

Re: Sterling. It had been rising for a few days (that's not in the scaremongers' text book, is it?  ). It expectedly fell back after the B of E interest rate cut. It's now fluctuating at the same levels it was before it rose a few days ago.

 

It seems some people are just desperate for any sign of the British economy failing.

[salavan]

12 minutes ago, Grouse said:

Well done Brexiteers!

 

you were right! All the warnings were just scaremongering!

 

45 Baht and 1.31 USD and much further to go

 

Nissan putting all investment in UK on hold pending agreement with EU

 

GS restructuring pending passporting agreement

 

Economy slowing at fastest rate since 2008/9

 

Where are all the Brexit types?

 

run off, that's what!

 

anyway, well done!

i hope the brexit voters suffer the most teach them a lesson not to vote for things they know nothing about,

also cameron should go to jail for giving  idiots the chance to vote about something they know nothing about but he's also run off now couldn't get away fast enouh

[ourmanflint]

6 minutes ago, salavan said:

i hope the brexit voters suffer the most teach them a lesson not to vote for things they know nothing about,

also cameron should go to jail for giving  idiots the chance to vote about something they know nothing about but he's also run off now couldn't get away fast enouh

I think they were already suffering and that is why they voted out. 

[12DrinkMore]

 

2 hours ago, salavan said:

i hope the brexit voters suffer the most teach them a lesson not to vote for things they know nothing about,

also cameron should go to jail for giving  idiots the chance to vote about something they know nothing about but he's also run off now couldn't get away fast enouh

 

Who was and is responsible for giving the voters clear, verifiable and unbiased information?

 

And a big part of the problem is EXACTLY what you wrote.

 

The voters were fed up of being treated like idiots.

 

[12DrinkMore]

2 hours ago, elgordo38 said:

Prior to 1982 stock buy backs were illegal till the then head of the SEC tweaked the system

 

It became a absolute no-brainer for company directors to keep the shareholders happy and themselves even more wealthy to use capital to buy back stocks rather than actually do some work and run the companies.

[dunroaming]

Still early days but the signs are not good.  The brexit supporters are not going to accept the position as it is, nobody wants to admit they got it wrong.  What the BOE are doing is prudent and we need to put in damage control sooner rather than later.

[12DrinkMore]

13 minutes ago, dunroaming said:

Still early days but the signs are not good.  The brexit supporters are not going to accept the position as it is, nobody wants to admit they got it wrong.  What the BOE are doing is prudent and we need to put in damage control sooner rather than later.

 

The damage is being done by these policies.

 

QE and ZIRP came in to keep the financial system running. They should have been phased out slowly.

 

If the economy needs money at 0.25% interest rather than 0.5% in order to be stimulated into doing something there is something very seriously wrong. My finger points at the fiscal policies and incompetence headed by the string of clots ensconsed in number 10.

 

Carney has said it many times, and so has Draghi in Europe.

 

The elected and non-elected administrations have no dynamic anymore. They just want to sit out their time and collect a nice pension.

[Grouse]

You understand eugenics?

 

I believe they know EXACTLY who voted for Brexit

 

They should be careful what they consume.....

3 hours ago, Khun Han said:

Re: Sterling. It had been rising for a few days (that's not in the scaremongers' text book, is it?  ). It expectedly fell back after the B of E interest rate cut. It's now fluctuating at the same levels it was before it rose a few days ago.

 

It seems some people are just desperate for any sign of the British economy failing.

 

You clearly don't understand Forex trading

 

the interest rate cut was obvious

 

Dealers needed to maximise the cable drop so forced up Sterling before the announcement.

 

sterling will fall to 1.20 USD and 42 Baht. 

 

Like a bet?

 

[Khun Han]

1 hour ago, Grouse said:

You understand eugenics?

 

I believe they know EXACTLY who voted for Brexit

 

They should be careful what they consume.....

 

You clearly don't understand Forex trading

 

the interest rate cut was obvious

 

Dealers needed to maximise the cable drop so forced up Sterling before the announcement.

 

sterling will fall to 1.20 USD and 42 Baht. 

 

Like a bet?

 

 

I just had a look, and Sterling is currently on the rise again. How does that fit into the scaremongering script, mr currency expert? Wasn't Sterling supposed to be below parity with the US Dollar by now, anyway?

[thaibeachlovers]

The BOE is an evil organistaion that seeks to maximise private bank profits by allowing them to borrow money for next to nothing which they then lend out for interest, and depriving savers of any interest on their savings. IMO, the people that run the BOE are scum that are ruining the common person.

 

It is not even their job to stimulate the economy.

 

Next they will be bringing in negative interest and the cashless society.

[Grouse]

17 minutes ago, Khun Han said:

 

I just had a look, and Sterling is currently on the rise again. How does that fit into the scaremongering script, mr currency expert? Wasn't Sterling supposed to be below parity with the US Dollar by now, anyway?

What on earth are you talking about?

 

look at a graph of last 3 months and get back to us

 

looks like 1.45 to 1.31 to me. 10%?

 

Good for me

 

But it will go to about 1.20 or lower.

 

short fluctuations are because of dealing.

 

By parity you mean 1 USD = 1 GBP?

 

nobody said that. Please show me evidence

 

It did happen in the 80s but conditions were very different

 

This is self harm. The people who did this need to see a trick cyclist.

 

only 10% of our GDP is manufacturing. 

[Grouse]

20 minutes ago, Khun Han said:

 

"I did not meet a single Brexiteer the whole time"

 

 

Maybe the referendum result was faked?

 

No, the great unwashed wanted to rebel. Felt down trodden.

 

Encouraged by fraudsters (who have since run off) they voted to leave the EU.

 

I suspect many regret that and many more will follow.

 

Too late now

 

Well done Brexiteers! Great job!

 

*******s!

[Grouse]

On 8/5/2016 at 6:44 PM, Khun Han said:

 

"I did not meet a single Brexiteer the whole time"

 

 

Maybe the referendum result was faked?

 

No, the great unwashed wanted to rebel. Felt down trodden.

 

Encouraged by fraudsters (who have since run off) they voted to leave the EU.

 

I suspect many regret that and many more will follow.

 

Too late now

 

Well done Brexiteers! Great job!

 

 

[Grouse]

8 minutes ago, Baerboxer said:

 

The UK energy experts, major users, suppliers and politicians all knew several years ago that the supply of energy would not meet demand by about 2017 unless action was taken. We were myopic to loose our own nuclear capability. 

 

Unless you want to go back to coal mining of course, as the cheap Polish coal might not be so cheap anymore.

 

I voted to remain but for a number of reasons. Some of the more contentious issues that should have been discussed as they would have come up as Germany and France push for more and more central unification were never even discussed. Immigration and lies about the cost of EU membership and false promises of what would be done with that money, and sovereignty were the main drivers from the Brexiters I spoke with. And very few had a real grasp of the factual reality of those issues but quoted the distortions of certain politicians and media barons.

 

One of the worst things ever to happen in the UK - starting with a referendum with no apparent rules other than first past the post no matter how many vote, to the lack of comprehension of the constitutional legality, and finally the complete lack of any coherent plans. 

 

You are absolutely correct

 

We should have kept up our own nuclear designs starting with Dounreay fast breeders.....

 

We are now in an awful situation 

[Grouse]

44 minutes ago, thaibeachlovers said:

The BOE is an evil organistaion that seeks to maximise private bank profits by allowing them to borrow money for next to nothing which they then lend out for interest, and depriving savers of any interest on their savings. IMO, the people that run the BOE are scum that are ruining the common person.

 

It is not even their job to stimulate the economy.

 

Next they will be bringing in negative interest and the cashless society.

 

I think we've heard quite enough of the "common person"

 

Here is a snap shot of the BoE

 

Founded in 1694, the Bank of England is the central bank of the United Kingdom. Sometimes known as the ‘Old Lady’ of Threadneedle Street, the Bank’s mission is to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.

 

Your conspiracy theories are, of course, utter nonsense.

[mommysboy]

   Any sane person knew it was the worst possible result if only because of the timing: global demand is weak again imo.  It's the uncertainty that is the problem. Ironically, UK is a better place to invest than it was even a month ago.  But markets react on primal emotions.

   The latest stimulus package is more smoke and mirrors.  What is needed is real investment, or at least putting money in to the consumer's pocket. What we really don't need is to make rich people even richer.

   It's the uncertainty surrounding Brexit which is the antagonizer.  It really is the case that we either initiate exit , or not.  Either way is ok, but sitting in the middle is no answer at all.

 

Edited August 5, 2016 by mommysboy

[Khun Han]

2 hours ago, Grouse said:

What on earth are you talking about?

 

look at a graph of last 3 months and get back to us

 

looks like 1.45 to 1.31 to me. 10%?

 

Good for me

 

But it will go to about 1.20 or lower.

 

short fluctuations are because of dealing.

 

By parity you mean 1 USD = 1 GBP?

 

nobody said that. Please show me evidence

 

It did happen in the 80s but conditions were very different

 

This is self harm. The people who did this need to see a trick cyclist.

 

only 10% of our GDP is manufacturing. 

 

Or how about we look at a graph of exchange rates since the referendum result? Wouldn't that be a fairer indicator of Sterling's performance post-the brexit bombshell? Oh, that analysis would be no good would it? It doesn't fit in with the 'sky is falling' alarmist nonsense does it?

 

The 'Sterling below parity with the US Dollar' retort was a common one in these discussions a few weeks ago. Some people have short memories. In your expert opinion, when will Sterling hit $1.20? And will it stabilise at that level?

[Grouse]

49 minutes ago, Khun Han said:

 

Or how about we look at a graph of exchange rates since the referendum result? Wouldn't that be a fairer indicator of Sterling's performance post-the brexit bombshell? Oh, that analysis would be no good would it? It doesn't fit in with the 'sky is falling' alarmist nonsense does it?

 

The 'Sterling below parity with the US Dollar' retort was a common one in these discussions a few weeks ago. Some people have short memories. In your expert opinion, when will Sterling hit $1.20? And will it stabilise at that level?

 

The 3 month nicely illustrates the trend with the vote in the middle

 

my opinion is that that cable will hit 1.20 when the Fed increases interest rates. I reckon about a month out.

 

Again, I never saw parity as an outlook.

 

I am not an forex expert. I am an Engineer. But I did move into USD from GBP in plenty of time ?

Edited August 5, 2016 by Grouse
Typos

[billd766]

12 hours ago, mesterm said:

I thought most Brexit supporters said that there will be no negative effects?

 

Most Brexit supporters have said that there will be a negative effect in the short to medium as against the IMF, World bank etc who said that the UK would be deep in trouble. Oddly enough the chairman of the BoE  was one of them too but that was under a different PM.

[ilostmypassword]

1 hour ago, Khun Han said:

 

Or how about we look at a graph of exchange rates since the referendum result? Wouldn't that be a fairer indicator of Sterling's performance post-the brexit bombshell? Oh, that analysis would be no good would it? It doesn't fit in with the 'sky is falling' alarmist nonsense does it?

 

The 'Sterling below parity with the US Dollar' retort was a common one in these discussions a few weeks ago. Some people have short memories. In your expert opinion, when will Sterling hit $1.20? And will it stabilise at that level?

A common opinion I saw expressed at the time in the forum was that the pound would rise back to its former levels and that it was a good time to buy it.