LONDON (AFP) –
The Bank of England (BoE) cut Thursday its benchmark rate to a new historic low of 0.25% to support the British economy, threatened by the decision UK to leave the European Union (EU).
the BoE also increased by 60,000 million pounds (79,000 million dollars) its program of buying government bonds and allocated to 10,000 million pounds a acquisition of corporate bonds.
the monetary easing plans to address growth will be “clearly weaker” than expected, because of Brexit said the central bank.
almost all investors and a large majority of analysts expected the cut by 0.25 percentage points in the rate, which since March 2009 was at 0.50%.
in 2009, the decision sought to pull the economy out of recession that had plunged the international financial crisis.
the UK ruled in a referendum on June 23 in favor of leaving the EU. The result came as a surprise to most observers and created great uncertainty about the consequences of the separation process, which could take at least two years.
Several indicators such as plummeting rates “PMI” in services and the slowdown in the real estate market in recent weeks confirmed fears of a slowdown or even a recession.
the BoE governor Mark Carney, multiplied in following the referendum their television appearances days to ensure that the institution would do everything necessary to stabilize the financial system.
the possibility of a collapse of the markets seems to have moved away, despite the depreciation sterling, but the BoE should instill security on the prospects for economic growth.
the first meeting of the Monetary Policy Committee (CPM) on the rear BoE to Brexit in July, left the rates unchanged for estimating the economic data available at that time were still insufficient to take action.
But one of its members, Martin Weale, who had previously advocated prudence, changed his mind after the Posted on 22 July, a disastrous composed of managers PMI purchases, which fell to its lowest level since April 2009 index.
Pressure
the pressure on the BoE also increased by the fact that the new finance minister, Philip Hammond, exclude any government initiative economic recovery until next autumn (northern hemisphere).
the program asset purchases or “quantitative easing”, consisting mainly of the purchase of government bonds, was released by the CPM in March 2009 and reached in July 2012 375,000 million pounds and held since then at that level.
the elevation of that level would aim to acquire credits considered “safe” in the hands of pension funds or insurance companies, to encourage them to invest in riskier assets such as corporate bonds or the stock market.
the Bank of England cut its interest rates for the first time since 2009, revived its program of bond purchases and said it would take “all necessary actions” to achieve stability British economy after the country’s decision to leave the European Union (EU).
the central bank expects the economy to stagnate for the rest of 2016 and to register weak economic growth over the next year . The agency cut its benchmark lending rate to a record low of 0.25% from 0.5%, in line with market expectations.
The Bank of England (BoE, for short) also launched two new stimulus schemes: one to acquire up to 10,000 million pounds in corporate bonds with investment grade and one which could reach 100,000 million pounds to ensure that banks continue to provide credit after applying the interest rate cut <. / p>
the pound fell 1% against the dollar after the announcement, while bond yields British government fell to record lows and the main stock index in London gained 1%.
most members of the Monetary Policy Committee (MPC) of the BoE also expect cut again this year, the benchmark rate “close to, but slightly above zero” if the economy shows a weaker than expected performance.
“Following the decision of the UK to leave the EU, the exchange rate has gone down and the outlook for growth in the short to medium term has weakened markedly,” said the central bank in its report quarterly on inflation.
the governor of the Bank of England, Mark Carney, said the agency took action because the economic outlook had severely changed after the referendum on the “Brexit”.
“by acting early and comprehensively, the MPC may reduce uncertainty, encourage confidence, stop the slowdown and support the necessary adjustments in the British economy,” he said at a news conference.
“the bank continues prepared to take any measure necessary to achieve its objectives of monetary and financial stability while the UK is adjusted to this new reality and moves toward new opportunities outside the EU, “said Carney.
not all measures were unanimous
Finance Minister, Philip Hammond, was pleased with the rate cut and said the government and the central bank had “with all the tools needed to support the economy at the beginning of this new chapter. “
the authorities of the MPC not fully agreed on how to respond to the effects of” Brexit “. Cutting the benchmark interest rate and as it seeks to shore up the banks to break through consumer benefits, known as Periodic Financing Scheme (TFS) – obtained unanimous support
But three members. Kristin Forbes panel, Ian McCafferty and Martin Weale- opposed the decision -approved finally to raise the limit of purchases of government bonds to a total amount of 435,000 million pounds, from 375,000 million pounds which it reached at the end of 2012.
Forbes also opposed to purchases of corporate debt, a measure taken by the BoE for a short period after the financial crisis, but it offers more benefits to the financial market growth economic itself.
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