Bank of England's Carney hints again at more stimulus after Brexit

Tue Jul 12, 2016 9:13am EDT
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By David Milliken and Ana Nicolaci da Costa

LONDON (Reuters) - Bank of England Governor Mark Carney said on Tuesday that a hit to Britain's economy from last month's decision by voters to leave the European Union could prompt the Bank to act, hinting again that more stimulus is on the way.

"If the outlook has worsened, to use that term, in the judgment of the MPC there always could be monetary response if that is consistent with its remit," Carney told lawmakers.

Carney and his fellow members of the Bank's Monetary Policy Committee, who have previously warned of a material hit to Britain's economy from a Brexit vote, are meeting this week, meaning they are not supposed to talk about the outlook for interest rates in detail.

The Bank is due to announce whether it has cut rates or taken other action on Thursday.

Carney has previously given a more explicit signal that the BoE will act to cushion the impact of the vote. A week after the June 23 referendum, he said he expected the Bank to pump more stimulus into the economy over the summer.

Sterling, which hit a one-week high against the U.S. dollar earlier on Tuesday buoyed by the quicker-than-expected appointment of a new British prime minister, added to its gains as Carney and other BoE officials spoke on Tuesday.

Investors expect the BoE to cut interest rates below their already record low of 0.5 percent as soon as Thursday. However, many economists have said the Bank might wait until its next policy announcement on Aug. 4 when it will have a better sense of the impact of the "Leave" decision on the economy.

Sam Hill, an economist with RBC Capital Markets, said he believed Carney's comment, within the limits of what he can say immediately before a policy announcement, was in line with his previous steer about further stimulus soon. "I don't discern a change in stance from the speech," Hill said.   Continued...

Bank of England governor Mark Carney pauses as he speaks during a news conference at the Bank of England in London, Britain July 5, 2016. REUTERS/Dylan Martinez/File Photo