View more on these topics

Carney tells banks to prepare for rate cut in event of Brexit

Mark-Carney-close-up-focused-700.jpg

The Bank of England is expected to warn of cuts to inflation and interest rates if the UK votes to leave the European Union on 23 June.

The Sunday Times reports the central bank has already asked other institutions to prepare for a rate cut, ahead of setting out the economic implications of a Brexit vote in its inflation report later this week.

One bank chief executive told the newspaper he had been invited to Threadneedle Street for an informal discussion and was told to check whether the bank’s balance sheet could withstand an interest rate cut.

Bank of England governor Mark Carney has previously warned Brexit represents the biggest risk to UK growth.

Elsewhere, Chancellor George Osborne has argued leaving the EU would make mortgages more expensive and significantly impact house prices.

Appearing on ITV’s Peston on Sunday, ahead of the publication of Treasury research about the cost of Brexit, Osborne said: “I’m pretty clear that there will be a significant hit to the value of people’s homes and to the costs of mortgages. That is one example of the kind of impact, economic impact, that we get from leaving the EU.”

Recommended

Mark-Carney-with-bank-note-in-background-700.jpg
2

Mark Carney: Brexit vote biggest risk to UK growth

A vote to leave the EU might result in an “extended period of uncertainty” for the UK’s economic outlook, says Bank of England governor Mark Carney, admitting that the vote is the biggest risk to the UK’s financial stability. Speaking to the House of Lords economic affairs committee yesterday, Carney said threats stemming from the forthcoming […]

George-Osborne-Delight-700x450.jpg
2

Brexit would shrink UK economy by 6% says Osborne

Chancellor George Osborne has warned that a vote to leave the EU would result in the UK’s GDP falling by more than 6 per cent. In a letter published in The Times, Osborne said that the Treasury’s economic analysis showed that ever UK household would be annually worse off by £4,300. Focusing on a Canadian-style […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. I am totally befuddled. It seems as my college economics course is completely obsolete. (Perhaps not so surprising as it was rather last century!).

    In the event of Brexit I would have thought that the hedge funds, investment banks etc would short Sterling (Remember Soros?). If that would be the case (and if Sterling sinks anyway as a result of Brexit), then according to my understanding and what has happened in the past – interest rates (and thus inflation) would go up significantly.

    On the other hand Osbone has said that mortgages would go up and values would go down – that seems to imply a sinking pound and higher interest rates.

    The Governors remarks would imply to my mind that he expects Sterling to strengthen on Brexit. I wonder how he reaches that conclusion?

  2. Gaynor Newman 9th May 2016 at 9:40 am

    Is this not a contradiction. Mark Carney saying rates will reduce and George Osborne suggesting they will increase?

  3. Philip Milton 9th May 2016 at 9:41 am

    Clearly he needs to brush-up on his economics. He can’t have it both ways. If the Pound is going to sink as ‘he’ predicts if we leave, then to avert an inflation disaster from imported higher prices and to protect the currency, he’ll need to increase interest rates.

    If interest rates fall, that won’t trigger a collapse in the value of people’s homes – a rise might well do so as people have been so imprudent in their excesses and affordability at these artificially low levels.

    The elephant in the room is actually the economic tsunami facing our Country (and others) from a housing market collapse back to realistic levels – and that has nothing to do with Brexit but simply successive governments and Bank of England Governors doing nothing to avert this purely speculative bubble and it is now too late. Would a 50% collapse (a mere £2.5trillion asset write-down) not have an adverse impact on the ‘buoyant’ UK economy so dependent upon it?

  4. It’s all immaterial anyway, I don’t think any seriously believes that brexit has a hope in hell of happening. Unless the British people decide en masse that, given 99% of the political class, big business and the media are all in favour of ‘Remain’, then there may be some merit in Brexit after all and we should vote to give them all a bloody nose, which seems extremely unlikely.

  5. Despite MM headlines and comments, MC did not say Brexit was the biggest risk to the UK.

    He said it was the biggest domestic risk, and that China/global issues were a higher risk. He also confirmed to the BoE would not attempt to analyse UK benefits of EU membership. I wonder why!!!

    Philip Milton is right. Actually, the biggest domestic risk is QE-fuelled asset bubbles, for which Mr Carney is accountable.

  6. James Hurdman 10th May 2016 at 1:40 pm

    It would appear that one of these two is telling porkies. Surely it isn’t the politician. As an aside, I would have thought/hoped that Banks had already prepared for either outcome.

    @ Gareth Hunt – I am glad that you have pointed this out as I have seen Mr Carney’s comments on the risk misquoted several times. The truth is, he is more concerned with global risks than Brexit.

Leave a comment