Carney: rate cut likely over summer

Bank of England governor Mark Carney has said that in his view "the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer".

Related topics:  Finance News
Rozi Jones
30th June 2016
Mark Carney BoE
"Monetary policy cannot immediately or fully offset the economic implications of a large, negative shock."

In a speech today, Carney said that "uncertainty over the pace, breadth and scale of these changes could weigh on our economic prospects for some time".

He also confirmed that the Bank of England will continue to offer Indexed Long-Term Repo operations on a weekly basis until end-September 2016 to provide additional flexibility in the Bank’s provision of liquidity insurance over the coming months.

Carney said that over the coming weeks, the Bank will consider "a host of other measures and policies to promote monetary and financial stability".

He admitted that a return of inflation to the 2% target probably required a gradually rising path for Bank Rate over the next three years, instead of the two previously forecasted.

Carney added: "The MPC will face a trade-off between stabilising inflation on the one hand and avoiding undue volatility in output and employment on the other. The implications for monetary policy will depend on the relative magnitudes of these effects.

He said that an "uncomfortable truth is that there are limits to what the Bank of England can do".

Carney concluded: "Monetary policy cannot immediately or fully offset the economic implications of a large, negative shock. The future potential of this economy and its implications for jobs, real wages and wealth are not the gifts of monetary policymakers.

"These will be driven by much bigger decisions; by bigger plans that are being formulated by others. However, we will relentlessly pursue monetary and financial stability. And by doing so we will facilitate the adjustments needed to realise this economy’s full potential."

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