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| Bank of England says emergency rate cut will protect firms and jobs - business live | Bank of England says emergency rate cut will protect firms and jobs - business live |
| (32 minutes later) | |
| UK central bank has cut Bank Rate to just 0.25%, to respond to the economic shock from Covid-19 | UK central bank has cut Bank Rate to just 0.25%, to respond to the economic shock from Covid-19 |
| Back at the Bank of England, Mark Carney is insisting that the coronavirus crisis needn’t create a new financial crisis. | |
| Q: Do we need co-ordinated action by the world’s governments, asks my colleague Richard Partington? | |
| Carney replies that he was involved in the joint interest rate cuts of 2008 (when he was Bank of Canada governor). | |
| Those measures were needed to “get to the weekend”, so G7 leaders could decide what steps to take, Carney says. | |
| Q: Won’t savers suffer from today’s rate cut, asks the Daily Mail... | |
| Carney replies that Daily Mail readers will understand that people’s lives, jobs, businesses need to be protected during the coronavirus crisis. | |
| Q: But what if the economic shock of coronavirus isn’t temporary, as you believe? | |
| Carney insists there is no reason for the economic damage to be as bad as 2008. | |
| His successor, Andrew Bailey, also warns commercial banks that the BoE expects this morning’s measures to be passed on. Customers deserve to be treated fairly, he says, and we’re watching....n | |
| Today’s GDP report shows clearly that Britain’s manufacturers have been struggling for months: | |
| Britain’s economy was dragged back by a decline in its car sector in the last quarter. | |
| The ONS says: | |
| NEWSFLASH: Britain’s economy failed to grow in the last few months, showing it was weak even before the coronavirus struck. | |
| GDP was flat in January, according to new data from the Office for National Statistics. | |
| It was also flat in the November-January quarter - weaker than expected, and dashing hopes that the economy enjoyed a bounce after December’s general election. | |
| The ONS says that Britain’s dominant services sector was flat in the three months to January 2020, while production contracted by 1.0%. Construction (a small part of the economy) grew by 1.4%. | |
| Q: Do you agree with Christine Lagarde’s warning that Europe faces a repeat of the 2008 crisis? | Q: Do you agree with Christine Lagarde’s warning that Europe faces a repeat of the 2008 crisis? |
| Mark Carney replies that this is a different crisis -- reiterating that the banking sector is much stronger than a decade ago. | Mark Carney replies that this is a different crisis -- reiterating that the banking sector is much stronger than a decade ago. |
| There is no reason for this shock to turn into the experience of 2008, which created a “virtual lost decade” in some countries -- if policymakers handle it well, he says. | There is no reason for this shock to turn into the experience of 2008, which created a “virtual lost decade” in some countries -- if policymakers handle it well, he says. |
| Carney also points out that coronavirus is fundamentally a health crisis, pointing to the “extraordinary efforts” of NHS health professionals, carers, and volunteers across the country. | Carney also points out that coronavirus is fundamentally a health crisis, pointing to the “extraordinary efforts” of NHS health professionals, carers, and volunteers across the country. |
| The next governor, Andrew Bailey, wades in too -- saying the Bank has spent a decade bolstering the financial sector to cope with such an economic shock (although they weren’t expecting this particular one). | The next governor, Andrew Bailey, wades in too -- saying the Bank has spent a decade bolstering the financial sector to cope with such an economic shock (although they weren’t expecting this particular one). |
| Q: If interest rates can be lower -- why didn’t you cut them there today, rather than only cutting to 0.25%? | Q: If interest rates can be lower -- why didn’t you cut them there today, rather than only cutting to 0.25%? |
| Mark Carney repeats that today’s measures are a “big package” -- again citing the cut to the Countercyclical Capital Buffer which releases £190 billion of bank lending to businesses. | Mark Carney repeats that today’s measures are a “big package” -- again citing the cut to the Countercyclical Capital Buffer which releases £190 billion of bank lending to businesses. |
| And he again hints at the Budget will include significant measures -- you’ll have to wait until the end of the day, or at least midday, for the full package. | And he again hints at the Budget will include significant measures -- you’ll have to wait until the end of the day, or at least midday, for the full package. |
| Q: Could the UK fall into a recession this year, and what happens if the coronavirus is not temporary? | Q: Could the UK fall into a recession this year, and what happens if the coronavirus is not temporary? |
| Mark Carney insists that the shock of Covid-19 will pass with time, as medical treatments are devised. | Mark Carney insists that the shock of Covid-19 will pass with time, as medical treatments are devised. |
| It’s too early to talk about a recession, he insists -- although the direction of the impact on the UK economy is clear. | It’s too early to talk about a recession, he insists -- although the direction of the impact on the UK economy is clear. |
| Q: Might the Bank act again at its scheduled meeting later this month, and could you expand your QE (bond-buying) programme? | Q: Might the Bank act again at its scheduled meeting later this month, and could you expand your QE (bond-buying) programme? |
| Mark Carney replies that quantitative easing is very much part of the Bank’s toolkit. Asset purchases could provide useful firepower if needed. | Mark Carney replies that quantitative easing is very much part of the Bank’s toolkit. Asset purchases could provide useful firepower if needed. |
| But today’s moves are a ‘big package’, he insists. | But today’s moves are a ‘big package’, he insists. |
| Reducing Britain’s ‘counter-cyclical buffer’ (meaning banks are allowed to hold less capital) will release a “huge amount” of extra lending. | Reducing Britain’s ‘counter-cyclical buffer’ (meaning banks are allowed to hold less capital) will release a “huge amount” of extra lending. |
| Onto questions | Onto questions |
| Q: Are UK interest rates now as low as they can go? | Q: Are UK interest rates now as low as they can go? |
| No, Mark Carney replies. There is room for interest rates to be cut further, to just above zero. | No, Mark Carney replies. There is room for interest rates to be cut further, to just above zero. |
| Q: What evidence is there that Covid-19 is creating an economic shock in the UK? | Q: What evidence is there that Covid-19 is creating an economic shock in the UK? |
| Carney says there are some early signs -- China’s growth swinging from 5.5% growth to a likely contraction. | Carney says there are some early signs -- China’s growth swinging from 5.5% growth to a likely contraction. |
| He also cites very early signs in the global PMI reports (surveys of purchasing managers). | He also cites very early signs in the global PMI reports (surveys of purchasing managers). |
| In the financial crisis more than a decade ago, the financial sector was the “core of the problem”, says Mark Carney. | In the financial crisis more than a decade ago, the financial sector was the “core of the problem”, says Mark Carney. |
| Now it can be now it can be part of the solution | Now it can be now it can be part of the solution |
| Carney says the banks have been transformed in the last decade -- to make them strong enough to survive an economic shock. This was prudence with a purpose, resilience with a reason. | Carney says the banks have been transformed in the last decade -- to make them strong enough to survive an economic shock. This was prudence with a purpose, resilience with a reason. |
| Andrew Bailey, who will succeed Mark Carney as governor next week, is also attending today’s press conference. | Andrew Bailey, who will succeed Mark Carney as governor next week, is also attending today’s press conference. |
| Bailey says the Bank is taking steps to ensure that businesses and households can access the credit they need to get through the economic disruption of Covid-19. | Bailey says the Bank is taking steps to ensure that businesses and households can access the credit they need to get through the economic disruption of Covid-19. |
| The new Term Lending Scheme should create more than £100bn of new credit, Bailey says. And reducing the UK countercyclical capital buffer rate to 0% will support up to £190bn of bank lending to businesses, he adds. | The new Term Lending Scheme should create more than £100bn of new credit, Bailey says. And reducing the UK countercyclical capital buffer rate to 0% will support up to £190bn of bank lending to businesses, he adds. |
| Outgoing Bank of England governor Mark Carney says today’s actions are designed to keep firms in business, and people in jobs. | Outgoing Bank of England governor Mark Carney says today’s actions are designed to keep firms in business, and people in jobs. |
| Activity is likely to weaken materially in the coming months, with an economic shock hurting demand and supply within the UK economy, Carney tells reporters. | Activity is likely to weaken materially in the coming months, with an economic shock hurting demand and supply within the UK economy, Carney tells reporters. |
| The interest rate cut, and the new support for bank lending, will prevent the temporary disruption caused by Covid 19 from causing longer-lasting economic harm, Carney pledges. | The interest rate cut, and the new support for bank lending, will prevent the temporary disruption caused by Covid 19 from causing longer-lasting economic harm, Carney pledges. |
| He also says the Bank is acting in a co-ordinated fashion with the Treasury -- and that today’s budget will contain a series of government initiatives to support the economy too. | He also says the Bank is acting in a co-ordinated fashion with the Treasury -- and that today’s budget will contain a series of government initiatives to support the economy too. |
| Reminder: there are more details in the Bank’s statement this morning (online here). | Reminder: there are more details in the Bank’s statement this morning (online here). |
| The Bank of England is about to hold a press conference to discuss today’s shock rate cut. You can watch it live here: | The Bank of England is about to hold a press conference to discuss today’s shock rate cut. You can watch it live here: |
| Newsflash: the head of the European Central Bank, Christine Lagarde, has warned that Europe risks a major economic shock similar to the financial crisis unless leaders act urgently on the coronavirus. | Newsflash: the head of the European Central Bank, Christine Lagarde, has warned that Europe risks a major economic shock similar to the financial crisis unless leaders act urgently on the coronavirus. |
| That’s via Bloomberg. | That’s via Bloomberg. |
| The ECB holds its next policy meeting tomorrow, and many investors and traders believe it will announce new policy measures to help the eurozone economy. | The ECB holds its next policy meeting tomorrow, and many investors and traders believe it will announce new policy measures to help the eurozone economy. |
| With interest rates already at zero, the ECB’s options are limited. But it will be desperate to shore up confidence in eurozone banks - especially with Italy facing a deep recession and a possible surge in bad loans. | With interest rates already at zero, the ECB’s options are limited. But it will be desperate to shore up confidence in eurozone banks - especially with Italy facing a deep recession and a possible surge in bad loans. |
| Here’s some instant reaction, from Peter Garnry of Saxo Bank.... | Here’s some instant reaction, from Peter Garnry of Saxo Bank.... |
| ...and Carsten Brzeski of ING: | ...and Carsten Brzeski of ING: |
| Here’s our economics editor Larry Elliott’s rapid analysis on today’s rate cut: | Here’s our economics editor Larry Elliott’s rapid analysis on today’s rate cut: |
| Heathrow airport has reported a significant fall in passenger traffic in February and March -- confirming that the coronavirus is wrecking havoc on the aviation industry. | Heathrow airport has reported a significant fall in passenger traffic in February and March -- confirming that the coronavirus is wrecking havoc on the aviation industry. |
| Britain’s largest airport said that total passenger numbers fell 4.8% last month, due to lower demand on Asian and European routes, regions where airlines have significantly cut back or halted flights due to the spread of the coronavirus. | Britain’s largest airport said that total passenger numbers fell 4.8% last month, due to lower demand on Asian and European routes, regions where airlines have significantly cut back or halted flights due to the spread of the coronavirus. |
| The traffic figures show that Asia Pacific passenger numbers fell by 19.6% in February, with European Union traffic down 1.6%. | The traffic figures show that Asia Pacific passenger numbers fell by 19.6% in February, with European Union traffic down 1.6%. |
| The amount of cargo passing through Heathrow in February fell by 9.5%, to 115,800 tonnes, as the effect of the virus hits global trade. | The amount of cargo passing through Heathrow in February fell by 9.5%, to 115,800 tonnes, as the effect of the virus hits global trade. |
| John Holland-Kaye, Heathrow’s chief executive, says: | John Holland-Kaye, Heathrow’s chief executive, says: |
| City economists are expecting the UK chancellor, Rishi Sunak, to announce a major increase in borrowing today. | City economists are expecting the UK chancellor, Rishi Sunak, to announce a major increase in borrowing today. |
| The Bank and the Treasury appear to be working in tandem to deliver a coordinated monetary and fiscal stimulus, in the face of a possible global recession triggered by the coronavirus outbreak. | The Bank and the Treasury appear to be working in tandem to deliver a coordinated monetary and fiscal stimulus, in the face of a possible global recession triggered by the coronavirus outbreak. |
| Sunak is expected to pledge to increase infrastructure spending in the five years of this Parliament by around £100bn. This increased spending on roads, rail, broadband etc will push public sector net investment up to 3% of GDP, from 2.2% per cent. | Sunak is expected to pledge to increase infrastructure spending in the five years of this Parliament by around £100bn. This increased spending on roads, rail, broadband etc will push public sector net investment up to 3% of GDP, from 2.2% per cent. |
| Kallum Pickering, senior economist at Berenberg Bank, explains: | Kallum Pickering, senior economist at Berenberg Bank, explains: |
| Today’s shock rate cut is the first unscheduled Bank of England move since the financial crisis, and the biggest as well: | Today’s shock rate cut is the first unscheduled Bank of England move since the financial crisis, and the biggest as well: |
| Stocks are rallying in London at the start of trading, following the Bank’s emergency rate cut. | Stocks are rallying in London at the start of trading, following the Bank’s emergency rate cut. |
| The FTSE 100 has rallied by almost 2%, gaining 116 points to 6074. | The FTSE 100 has rallied by almost 2%, gaining 116 points to 6074. |
| UK housebuilders are leading the rally, along with holiday firm TUI, and banks including Barclays. | UK housebuilders are leading the rally, along with holiday firm TUI, and banks including Barclays. |
| But a word of caution: the FTSE 100 surged by over 200 points early on Tuesday, before subsiding amid coronavirus fears. On Monday it plunged over 500 points. | But a word of caution: the FTSE 100 surged by over 200 points early on Tuesday, before subsiding amid coronavirus fears. On Monday it plunged over 500 points. |