What the interest rate-cutting by the Proposed referendum on United Kingdom membership of the European Union brings – THE WORLD

Mark Carney is known in the financial world for its methods. The head of the British central bank has already often disappointed analysts and bankers. Several times pointed the Canadians last year, a rate hike at that but then failed to materialize. therefore Carney got the nickname “unreliable boyfriend”: The central bank governor should be as the unreliable friend who promise only much, then not deliver, you blasphemed in the City of London

Photo: AP / EPA Has now done what all expected: Mark Carney lowered its key rate to a historic low

now, however, after the historic Proposed referendum on United Kingdom membership of the European Union-vote, Carney has him asked expectations met: As was announced at noon on Thursday, the monetary policy Committee of the Bank of England (BoE) has decided to reduce the key interest rate from 0.5 percent to 0.25 percent and again to buy bonds

This Britain lowers for the first time in six years the interest rates so low they were not since 322 years. Mark Carney and Finance Minister Philip Hammond hope so to be able to reduce the negative consequences of the EU referendum for the UK economy.

Important economic indicators, including the latest purchasing managers’ index, indicate a dramatic slowdown in the British economy since the vote on 23 June back.

The central bank therefore as strong as in 1983 no longer corrected their growth expectations. Instead of 2.3 percent, the UK economy is expected to grow by only 0.8 percent in the coming year. Whether the Bank is able, with its measures to prevent a hard landing for the economy, however, remains to be seen. Because: The basic problem – the uncertainty about what kind of relationship the UK will have in the future the EU – can be combined with monetary policy will not solve

interest rate-cutting is likely banks hurt

Because of the Proposed referendum on United Kingdom membership of the European Union-vote counted, the central bank with an inflation rate of more than two percent and with less consumer demand and an increase in unemployment. She is currently at 4.9 percent as low as in years, but is yet to be at 5.4 percent in 2017 and 2018 even at 5.6 percent.

in addition to lowering the key interest rate to 0.25 percent, the monetary policy Committee decided therefore resuming paused since 2013 bond-purchase program. The Bank of England may now buy gilts, known as gilts, at a height of up to 60 billion pounds (71 billion euros) and corporate bonds in the amount of up to ten billion pounds (11.8 billion euros).

Photo: Infographics World alert: the British purchasing managers’ index slipped below 50

This follows the lead of the ECB, the since the beginning of June the bonds of European States buys in order to stimulate the economy of the euro area.

A reduction in the key interest rate is expected as in the euro area in the UK the banks charge. They are a study of strategy consultancy Simon-Kucher and Partners that around 1.4 billion pounds (1.65 billion euros converted) earn less on operating profit.

To prevent banks face an existential crisis after Proposed referendum on United Kingdom membership of the European Union-vote, the BoE has therefore developed a credit program called “Term Funding Scheme” launched , With him, the banks and construction companies can borrow money from the central bank – “close to Bank rate”, on similar terms as the prime rate. Considering previous programs, the balance sheet of the Bank of England therefore swells up to 545 billion pounds.

What happens after the Proposed referendum on United Kingdom membership of the European Union?

analysts welcomed the decision of the Central Bank. “Although not as strong as expected, the rate cut is still the careful guidance, we expect the Bank of England under Mark Carney,” says Dean Turner, economist at UBS Wealth Management. “It was the much lower growth prospects and the possibility of a recession, which brought the Bank of England to act.”

, expressed similar Mike Amey, Head of sterling portfolios at Pimco: “the monetary policy Committee has used all the tools had expected the market This is a comprehensive program..” The pound sterling was immediately after the announcement of the interest rate decision by British and European stock indexes moved.

In the long run, however, could be the effectiveness of the central bank program very limited be. The negotiations between London and Brussels on the implementation of the Proposed referendum on United Kingdom membership of the European Union will lead only to correct stress test.

Prime Minister Theresa May will claims to trigger the Article 50, which the official, two-year exit process begins, until the beginning of 2017th “It remains to be seen whether these steps are sufficient to lift the mood among companies and consumers, while significant uncertainty over Britain’s membership of the EU continue to persist”, so says Anthony Doyle, investment director at M & G Investments.

long-term impact uncertain

This is the central bank governor Carney aware: “Many of the changes are not in the power of money politicians, “it says in a letter to Treasury Hammond. “Nevertheless, monetary policy can facilitate a portion of the adjustment.” However, business associations such as the British Chambers of Commerce (BCC) remain skeptical about whether the central bank action suffice.

“Lower interest rates can give the market confidence a boost, they act in the long term but only limited, if interest rates were already low,” says Adam Marshall , Director General of the BCC

Photo:. infographic the world hundreds of thousands of professionals planning to churn

Finance Hammond commented in a letter the central bank chief confident about the long-term prospects for the British economy. “The economy of the United Kingdom is fundamentally strong – employment is at record levels, there are nearly one million new companies and the budget deficit has been reduced by almost two thirds,” writes Hammond

withdrawal from the EU mean for the UK, a new chapter.” We are in a good position to cope with the volatility caused by the vote for the withdrawal from the EU I am ready to take all necessary steps to support the economy and to spread confidence. ”

Despite the economic slowdown, which was reflected earlier in the week in the substantial falls in PMI, the Bank of England has not cut its forecast for 2016, the UK economy to grow by a total of two percent.

In November see the money politicians already clear

the Geldpolitik- Committee of the Bank of England meets after the meeting on Wednesday again until the beginning of November. Then could the damage inflicted on the Proposed referendum on United Kingdom membership of the European Union-vote of the British economy, be clearly recognizable.

The central bankers are claims to ready to cut interest rates in this case further – but not to zero. You should also to a further cut in interest rates “a little above zero” are, it is the part of the Bank of England.

In November could also finance minister Philip Hammond new support measures for the UK economy announce. He holds his first start of the month “Autumn Statement”, one of two budget speeches per year.

“We expect in the fall of a fiscal response, as it has signaled the Chancellor,” says Dean Turner, economist at UBS Wealth Management. “This could give the central bank greater flexibility.”