Bank of England's Carney sees need for summer stimulus after Brexit shock

Thu Jun 30, 2016 2:40pm EDT
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By William Schomberg and David Milliken

LONDON (Reuters) - Bank of England Governor Mark Carney said the central bank would probably need to pump more stimulus into Britain's economy over the summer after the shock of last week's decision by voters to leave the European Union.

Carney also said he would not consider resigning from the Bank if his critics from the referendum's Leave campaign, who were angered by his warnings of a Brexit hit to Britain's economy, end up filling a power vacuum in the government.

"In my view, and I am not prejudging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer," he said in a speech on Thursday.

Investors were already expecting the BoE to cut interest rates in July or August from an already record low of 0.5 percent - unchanged since 2009 - and ramp up its 375 billion pound bond buying plan too.

Nonetheless, Carney's clear signal of further action to offset the Brexit shock pushed sterling down by more than 1 percent against the dollar to about a cent above the 31-year low it touched on Monday. The yield on 10-year British government bonds sank to a record low of 0.882 percent.

Carney said the BoE's Monetary Policy Committee would give an initial assessment of the impact of the referendum's impact on July 14, at the end of its next scheduled meeting. That would be followed by a full assessment on Aug. 4, when the Bank will deliver a reworked set of forecasts for the economy.

"In August, we will also discuss further the range of instruments at our disposal," Carney said.

Investors are facing a deeply uncertain political outlook after Prime Minister David Cameron said he would resign after losing a vote which will see the country separate from the EU, which buys almost half of Britain's exports.   Continued...

The governor of the Bank of England Mark Carney gives a press conference, his first since the leave result of the European Union referendum, at the Bank of England in the City of London, Britain Thursday, June 30, 2016. REUTERS/Matt Dunham/Pool