March 16, 2020 / 11:36 AM / 16 days ago

New BoE governor Bailey promises more 'prompt action' when needed

LONDON (Reuters) - New governor Andrew Bailey promised that the Bank of England would deliver further “prompt action” when needed to help Britain’s economy weather the hit from the global coronavirus pandemic.

Bailey, who succeeded Mark Carney as governor on Monday, told BBC News that the BoE was “very keen” to ensure that short-term damage to the economy did not permanently damage Britain’s longer-term growth prospects.

“That’s why you saw prompt action last week, that’s why you will see prompt action again when we need to take it, and the public can be assured of that,” he said in his first public comments since taking over as governor.

On Wednesday last week, the BoE launched emergency credit measures to prevent a wave of corporate bankruptcies, and cut its key interest rate to 0.25% from 0.75%.

A few hours later, new finance minister Rishi Sunak announced a surge in public spending .

On Sunday, the BoE joined the U.S. Federal Reserve and four other major central banks to make it easier for banks to access U.S. dollar liquidity.

Investors are watching for signs that the BoE will take further measures to help the world’s fifth-biggest economy before its next scheduled announcement on March 26, even though its room for maneuver has been reduced by last week’s action.

Economists say the BoE could trim rates to just above zero and expand its purchases of government bonds and corporate debt.

Some have even raised the prospect of more radical policies such as “helicopter money” — giving newly created money directly to households — depending on the severity of the downturn.

Bailey, who was accused by lawmakers of being slow to react to banking and fund management scandals in his old job as head of Britain’s Financial Conduct Authority, told parliament this month that he was nimble and dextrous enough to be BoE governor during times of global strife.

He pointed to his record during the financial crisis, when he spearheaded the BoE’s bank rescue packages.

STRONG COORDINATION

In his interview with the BBC, Bailey said the move on Sunday by six central banks, including the BoE, to provide cheap U.S. dollar funds to the financial system came in response to some “pretty big dislocations” in markets.

“We’re going to see how that works its way through the markets today (and) in the coming days to see what the effect is, but I would emphasize that this is strong coordination among central banks.”

The Fed cut its main lending rate to just above zero on Sunday.

Bailey also said he had ambitions for the BoE that go beyond protecting the economy from the coronavirus outbreak.

“Obviously we’re going to have a new relationship with the European Union, we’ve got very important issues in the world of financial technology and how the system adapts to that, and how the Bank of England adapts to that, frankly.”

He added that he wanted to the BoE to be represented better across the country as a whole.

“Of course, in the initial period, obviously it’s going to be very, very focused on the response to COVID,” Bailey said.

“We need to get through that period.”

Reporting by Andy Bruce; editing by David Milliken and Kevin Liffey

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