Bank of England says will take all necessary steps to ensure stability

Fri Jun 24, 2016 4:41am EDT
 
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By William Schomberg and Ana Nicolaci da Costa

LONDON (Reuters) - The Bank of England said on Friday it would take all necessary steps to shield Britain's economy from the shock decision by voters to pull the country out of the European Union which caused immediate turmoil on financial markets.

"The Bank of England is monitoring developments closely," it said in a statement after the referendum victory of the "Leave" campaign triggered a 10 percent fall in the value of sterling and a slump in government bond yields to a new record low.

"It has undertaken extensive contingency planning and is working closely with Her Majesty's Treasury, other domestic authorities and overseas central banks."

The BoE has previously said a decision to leave the EU -- which buys nearly half Britain's exports -- could deliver a material blow to the economy. But it could also push up inflation because of hit to sterling, complicating any decision to cut interest rates.

Interest rate futures FSSZ6 priced in a high chance of a BoE rate cut by the end of the year, a view which analysts at Citi also expected to be shared by the bond market.

The economy was already slowing as the referendum approached and BoE Governor Mark Carney said in May that it could suffer a technical recession -- a contraction in two consecutive quarters -- in the event of a vote to leave the EU.

Carney said earlier this year that a Brexit vote would also test the "kindness of strangers" who fund the country's big current account deficit.

He was due to speak to broadcasters on Friday.   Continued...

 
A war memorial is seen in front of the Bank of England in the City of London, Britain March 29, 2016. REUTERS/Toby Melville/Files