3-month-high before Bank

Bank of England rate decision

On Thursday, the BoE cut rates for the first time since 2009 by 25 basis points, slashed growth forecasts and said it would expand its program of government bond purchases, known as quantitative easing, to help prop up the British economy.

"Some of the adjustments to this new reality may prove difficult and many will take time, but the U.K. can handle change (as) it has one of the most flexible economies in the world, " said Mark Carney, governor of the central bank at a press conference.

"We cannot immediately or fully offset the economic impacts of a large structural shock, however monetary policy can support the necessary adjustments of the U.K. economy during a period of heightened uncertainty, and that's why at its meeting yesterday the MPC agreed an exceptional package of measures, " Carney said, adding that by acting early, the bank can reduce uncertainty, bolster confidence and support the necessary adjustments in the U.K. economy.

The news by the central bank helped lift stocks in both the U.K. and elsewhere in the world, with U.S. markets opening higher on the back of the announcement, however by Europe's close, stocks saw signs of sluggishness as weak performance in financials and energy weighed. Meanwhile, sterling slumped on the back of the announcement, off 1.4 percent against the U.S. dollar, at $1.3132 at 16.30 p.m. London time.

Despite the further easing measures in the pipeline, some have questioned whether it will make a difference.

"The uncertainty created by the Brexit referendum result cannot be addressed by small changes in interest rates or other monetary measures, " Andrew Sentance, senior economic adviser at PwC, said in a note after the decision.

"It requires a political response from the government, to make clear the nature of our future relationship with the EU - which will inevitably take time. There are some circumstances when a central bank can do little to offset the shock to the economy and the resulting uncertainty, and that is the case now."


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Source: www.cnbc.com
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