Bank of England fights the Proposed referendum on United Kingdom membership of the European Union-shock – FAZ – Frankfurter Allgemeine Zeitung

The British central bank is trying to contain the economic damage of the EU exit with a far-reaching package of monetary crisis measures. The Proposed referendum on United Kingdom membership of the European Union was a “huge shock” for Europe’s second largest economy, and if the money guardian did not act now, more jobs are still under threat as already said Mark Carney, Governor of the Bank of England. The central bank expects a significantly lower economic growth than before.

Author: Marcus Theurer, economics correspondent based in London. Follow

in order to stimulate the economy to reduce the central bankers the interest rate and buy bonds on a large scale by the British government and by private companies. If the feared strong economic downturn should be true, but further action is likely, Carney said. British Finance Minister Philip Hammond welcomed the measures taken by the central bank immediately. “It is true that monetary policy is used to assist in this period of adjustment, the economy,” Hammond said on Thursday.

Money is so cheap as never before

On the financial markets fell after the announcements of the value of the pound, while the prices of bonds and stocks rose. But Carney warned at the same time that the possibilities of the central bank are limited: Despite countermeasures the British economy will grow significantly weaker than previously thought after the Proposed referendum on United Kingdom membership of the European Union-vote, he said. “There are more than a quarter-million jobs lost,” Carney expected. The central bank expects 2017 only with a growth of 0.8 percent instead of the previous 2.3 percent. Unlike before the referendum it considers a recession but now for avoidable and is therefore optimistic than many bank analysts.

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money is in the UK also already as cheap as never before, since the establishment of the Bank of England in 1694. the central bank now halved its key interest rate again – to just 0.25 percent. The decision by the nine members of the Monetary Policy Council was unanimous. The prime rate is the interest rate at which the commercial banks can accept short-term loans with the central bank and the central control instrument of monetary policy. Carney rejected criticism back that characterized the savers would greatly punished: The long-term damage to the whole economy and thus also for many savers would be too great if the money guardian now not against steered decided he argued

. Bank of England also raises the printing press: Within six months, the central bank will buy government bonds in the volume of 60 billion pounds and also bonds of UK companies of up to 10 billion pounds. The British central bankers, like later the European Central Bank, set after the world financial crisis eight years ago on these so-called “quantitative easing” and bought between 2009 and 2012 bonds in the amount of 375 billion pounds. They now control about a quarter of all outstanding gilts.

Well, this mountain is expected to grow to 435 billion pounds on. By the interest rate cut and the bond purchases, the central bankers hope to reduce the already low interest rates further to boost lending and hence the economy.

Measures could be increased

to ensure that the commercial banks to pass on the lower interest rate and to their customers, the Bank of England also announced a large-scale new credit supporting program: the so-called “term funding Scheme” to reach a volume of up to 100 billion pounds, it said in London. Commercial banks may base their choice up to four years and at a cost that are approximately level with the base rate, borrow money directly with the bank. The loans, however, are subject to requirements for lending institutions.

The Fed chairman also gave to understand clearly that monetary guardian were ready to take further steps. All announced on Thursday measures could be strengthened again, Carney said. If the economic data should confirm the fears of central bankers in the coming months, is a majority of the members of the monetary policy committee for further easing, said Britain’s top money guardian decided demonstratively.

Carney reiterated, however, that he negative interest rates for harmful think – the interest rate screw the British money guardian after the reduction of Thursday therefore thus probably can only turn once again by setting the key interest rate to zero. The Fed chairman also gave the so-called “helicopter money” a clear rejection: So economists call the direct lending the central bank to the state. “But I see no need in the UK,” said Carney. Analysts, however, had recently speculated about such radical measures against the Proposed referendum on United Kingdom membership of the European Union-shock.

After the crisis measures of the central bank now focus his eyes on the new government in London. Many observers expect the Treasury Hammond will mitigate the recent austerity of his predecessor George Osborne at least to support the weakening economy. Hammond has however ruled out an emergency budget and will only present its fiscal plans in its regular semiannual financial statement in November.