LONDON (Reuters) - Bank of England Governor Mark Carney and other members of the Monetary Policy Committee gave a news conference on Thursday after the Bank cut rates for the first time since 2009 and said it would buy 60 billion pounds of government debt to ease the blow from the Brexit vote on June 23.
Below are highlights of their remarks.
REMARKS DURING QUESTION-AND-ANSWER SESSION WITH REPORTERS:
As you might have gathered ... I am not a fan of negative interest rates. We see the negative cosequences through the financial system and we see them in other jurisdictions.
We have other options to provide stimulus if more stimulus is needed, so we don’t need to go to that as a last resort, so we are very clear that we see the effective lower bound for interest rates as a positive number.
The banks have no excuse, with today’s announcement, not to pass on cut in bank rate and they should write to their customers and make that point.
Monetary policy is more nimble and it’s appropriate that it’s the first responder to a shock.
The biggest issues for government are those that they’ve acknowledged, which is the importance of the negotiations with European allies on the new relationship that will be developed, the importance of having a comprehensive productivity plan for the country, and it is within that context or its is those decisions and those policies which will really be the determinants of the long-term prosperity.
Businesses and households, anyone watching, if you have a viable business idea, if you qualify for a mortgage, you should be able to get access to credit. This is not 2008, ‘09, ‘10, ‘11, ‘12, ‘13 and half of ‘14. It’s a different world. But that’s enough in people’s memories that it’s important to take that off the table.
With respect to savers, this is something that we think about a lot as a group of people who have worked hard, absolutely done the right thing, set money aside and the returns are very low and they’re likely to be low for some time. That’s true in the UK, it’s true in all advanced economies.
The decision to leave the European Union marks a regime change. In the coming years the UK will redefine its openness to the movements of goods, services, people and capital.
Some of the adjustments to this new reality may prove difficult, and many will take time, but the UK can handle change.
To be clear, the future potential of this economy and its implications for jobs, real wages and wealth are not the gifts of monetary policymakers. We cannot immediately or fully offset the economic impacts of a large structural shock.
We took these steps because the economic outlook has changed markedly, with the largest revision to our GDP forecast since the MPC was formed almost two decades ago.
By acting early and comprehensively, the MPC can reduce uncertainty, bolster confidence, blunt the slowdown, and support the necessary adjustments in the UK economy.
The degree and composition of stimulus is largely determined by the effects of the vote to leave the EU on demand, supply and the exchange rate.
Beginning with demand, the 9 percent depreciation of sterling since the referendum will boost exports and weigh on imports. However, even though the MPC expects the current account deficit to halve over the next three years, improvements in the external sector are not expected to offset fully the drag from substantially weaker private domestic demand.
The MPC expects supply growth to remain well below past
average rates throughout the forecast period.
The fall in sterling will push up on import and consumer prices notably over the next three years.
Around half of mortgagors have floating rate contracts and more than four-fifths of bank loans held by firms are at floating rates; lower interest rates will be felt immediately in the economy.
The MPC is determined that the stimulus the economy needs does not get diluted as it passes through the financial system.
All of the elements in this package have scope to be increased. The MPC can lower the Bank Rate, increase the size of the TFS, and expand the scale or variety of assets held in the Asset Purchase Facility.
Reporting by Sarah Young, Paul Sandle and Elisabeth O'Leary, compiled by Estelle Shirbon