Mark Carney, Bank of England governor, signalled on Tuesday that the central bank would be willing to cut UK interest rates to “a little above 0 per cent” if it had to stimulate the economy, for example in a hard Brexit.
Speaking at a central banking conference in Portugal, the governor also said that although the BoE has not thought it is necessary to offer banks cheap funding since February 2018, but “the bank of course retains the ability to relaunch the scheme as necessary”.
The governor was not speaking specifically about Brexit, but his words confirmed that the BoE could act to offset a drop in demand, spending and lending in the event of a no-deal Brexit this Autumn.
Mr Carney, who is standing down from the BoE next January, also defended the use of guidance of the markets, keeping the public’s expectations in line with the BoE’s judgment over the past six years that interest rate rises would be only “limited and gradual”.
“Guidance can be useful in providing people with information about how the Committee sets policy and, over time, in improving the understanding of how monetary policy will adjust to news,” he said.