Thursday, August 4, 2016

After Brexit, the Bank of England lowers its rates – Les Echos

End of suspense. The Bank of England (BoE) has announced that it lowered its key rate to 0.25% against 0.50% earlier, unchanged since 2009 in the wake of the financial crisis. The monetary policy committee decided unanimously. The latter is in line with market expectations. They expected a lower rate and the probability of such action exceeded 95% according to the Bloomberg survey.

The BoE also decided to inject more liquidity in the economy, increasing by 60 billion pounds (71 billion euros) of its government bond purchase program in the next six months, and buying as much as 10 billion pounds of bonds business within 18 months.

It also launched a new system to provide cheap funds to banks up to 100 billion pounds, in the wake of “Funding for lending scheme”. Finally, the Bank of England revised its growth forecasts. In 2016, the Institute still expects a GDP growth of 2%, but reduced to 0.8% for 2017 against 2.3% during a projection provided in May.

The central bank is ready to take all necessary measures

A majority of the Monetary Policy Committee’s ‘expects a further rate cut before the end of the year, is it explained in the statement. The Governor of the Bank of England has nevertheless stated that it did not mean rates below 0% “ I’m not a fan of negative interest rates ” a-t- he declares.

In the wake of these ads, the British currency lost 1.35% against the greenback around 1.3150 dollar. The rate on 10-year UK government bonds eased 12 basis points to 0.6329%. The London Stock Exchange jumped more than 1% after an early session relatively stable. The CAC 40 takes 0.18% to 0.48% Frankfurt 2:45 p.m. ET

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Mi- July the BoE had preferred the status quo, while paving the way for an easing in August. The institution believed not to have still enough encrypted decline in Brexit impact on the British economy. The monetary policy committee had nevertheless indicated that it was prepared to take “ all measures to support growth and bring inflation back to its target at an appropriate horizon .”

VIDEO – The Bank of England seeks to reassure after Brexit

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