Bank of England has many choices to boost Britain's economy according to Governor Mark Carney
By Staff Writer
Feb 24, 2016 08:56 AM EST
Feb 24, 2016 08:56 AM EST
Mark Carney, governor of Bank of England, said that the bank has many choices in order to boost the economy in Britain. There is possibility for the bank to slack the financial policy over fears that the UK may step down from the European Union putting more burden on the pound.
The British pound sustained close to the lowest level beside the US dollar from the year 2009. As a result of Boris Johnson's campaign to quit from the European Union, sterling lurched almost 2% on Monday currency trading. The future of Britain's exit from the union seems to be more uncertain as traders continue betting on the bank's move to increase borrowing costs, as reported by Bloomberg.
According to Carney, the bank is seriously readying for the June 23 poll while at the same time screening for signs that could impact the nation's economy. Gertjan Vlieghe, a policymaker, said that he will choose to reduce the bank's key rate from its present rate of 0.5% amid the weak global forecast. He added that he has "little tolerance" for any additional shortcomings in the outlook.
The bank's standard rate has been maintained on hold for nearly seven years. The yield curve of the market shows that a 25 basis-point increase is not evaluated till 2019, with many investors circumscribing on the chance of lower borrowing costs. Carney said that the bank is not following the footsteps of the European Central Bank and the Bank of Japan in supporting the negative rates. He said, "It is now our judgment that we if necessary could lower bank rate. "It is not yet our judgment that it could go negative."
Reuters quoted Peter Dixon, an economist at Commerzbank, who said that at present Carney seems to be against the rate cutting idea. He continued that it is not easy for the bank to perform any financial reform in a period when the global economic pressures keep hammering Britain's economy.
Carney echoed his previous statement that the bank could trim its interest rate to zero or purchase private bond assets as part of its quantitative easing agenda. He added that BOE could narrow its time frame for repaying the inflation.
Mark Carney said at the Treasury meeting that the bank is not looking forward to make any prediction on the outcome of the June 23 poll. Currency analysts expects more slump in the pound value before the election. In October, Carney commented that Britain's membership in the European Union boosted the nation's economy. He added that its association with the union also exposed UK to many global financial hurdles, as reported in The Guardian.
Britain's exit from the union is feared to have an adverse impact on the nation's currency value, which in turn will affect its economy. Bank of England is trying to implement the trial and error method in its financial policies to boost the nation's economy.
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