By:DailyForex.com
Mark Carney, Governor of the Bank of England, seems to be about the only person in the UK who had a contingency plan up his sleeve for the totally unexpected decision taken in the referendum to leave the EU. Speaking to members of the Treasury Select Committee about the banks actions in the aftermath of the vote, Mr Carney described himself as “serene” with regard to the Bank’s preparations for the plebiscite, claiming it took “timely, comprehensive and concrete" action, which acted to "support, cushion and help the economy to adjust". According to the Governor, these actions mitigated the impact of Brexit (but it won’t be lost on him that the UK is at the very outset of the process and has yet to announce a formal decision to trigger Article 50 and leave the EU).
Last month’s decision by the Bank’s MPC to cut the interest rate to 0.25%, its lowest ever rate, supported house prices and the wider economy, according to Mr Carney, providing an improvement in mortgage borrowing costs which he was confident would be passed on to consumers. The Bank also reinvigorated asset purchases, pumping billions of Pounds into the UK economy. These actions have been credited (by the Bank, if nobody else) with helping the economy’s service, manufacturing and construction sectors to bounce back last month from declines seen in the immediate aftermath of the vote.
Mr Carney defended the Bank’s warning that a vote to leave would harm the economy (rightly so) noting that: "This financial system, under the oversight of the Bank of England, sailed through what was a surprise to the vast majority of financial market participants."
Ironically, the support that the Bank has provided to the economy has been sufficiently successful to convince sections of the political class and the general public that the warnings of economic harm to come were overplayed. The storm clouds of the UK economic crisis are gathering on the horizon and the only question will be of how catastrophic the storm will be when it arrives, not if there will be a storm.