LONDON (Reuters) - Bank of England Governor Mark Carney and other BoE officials are holding a news conference after the central bank took steps on Tuesday to address concerns over the country’s vote to leave the European Union.
“The UK has entered a period of uncertainty and significant economic adjustment. The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds.”
“We have been concerned for some time about these issues, the interplay between high levels of household indebtedness and the housing market and the possibility that there will be more vulnerable households because the economic environment turns and that that could weigh on the economic outlook and make the subsequent pick-up shallower.”
“In and of itself, the movement in sterling should be beneficial for the current account.
“But... the pace of investment will also be quite important in terms of where the balance is going over time.”
“The short answer is yes, we do have the capacity (to handle the Brexit process). We may have to prioritise what we work on, but we will do that. Of course, our contribution will be technocratic, it will be analytic.”
“We’re seeing indicators not just in terms of volume of transactions in commercial property but leading indicators around construction that in the run-up to the referendum they were slowing to put it mildly in construction and the possibility that that is going to continue.
“One of the things that Andrew Bailey and his team have done ... over the years is to ensure that the exposure of UK banks to commercial property has been kept quite manageable”
“The core of this system is very strong, we may see some volatility, we may see things move around, but the system is going to be there for someone who wants to buy a house or a business person with a viable plan.”
“We have a movements in the gilt curve which, to put it mildly, are not consistent with an acceleration in the pace of growth in this economy.”
“In terms of the equity markets I would focus a little bit more on the domestically-focused stock, the FTSE 250 or the component of FTSE 100 that is principally serving this economy.
“There’s been a much more significant move in those equities in pound terms or and in common currency terms, certainly in dollar terms, ... and that gives a sense of investor expectation which may not prove out.
“The all-in funding costs for banks ... haven’t really budged and that is a testament to the resilience that has built up.”
Asked about whether the UK could fall into recession, he said he would defer that answer until the MPC produced its next forecast in August.
“The MPC always recognised that the movement in sterling would help with the adjustment.
“The question is the scale of the other effects, the impact of this change on demand - one sees it initially in demand for larger, lumpier, irreversible investments whether somebody is buying a house, building or buying commercial real estate, making a large business investment.
“There’s growing body of evidence across all of those before the referendum that all of those were slowing. Everything we’ve seen since, albeit it’s early days, it’s mainly survey based, has suggested continuation of those trends.
“Even taking into account movement in the exchange rate, there is a prospect of material slowing in the economy.”
“If we do see a slowing in credit growth, it’ll be demand driven, not supply driven.”
“The FPC is today reducing the counter-cyclical capital buffer on banks’ UK exposures from 0.5 percent to 0 percent with immediate effect.
“This is a major change. It means that three quarters of UK banks, accounting for 90 percent of the stock of UK lending, will immediately have greater flexibility to supply credit to UK households and firms.”
“Let’s focus on the positives which is that financial markets are doing their jobs, they are adjusting to this change.
“There have been some reduced volumes in gilt markets and some heightened volatility but not inconsistent with the scale of the issue.
“The adjustment in sterling, which has been significant ... and sharp in the initial period, in fact, volatility spiked to its highest level ever, but that adjustment has moved in the direction that is necessary to facilitate some of the economic adjustments that are going to be required in the economy.”
“The fact of suspension is designed into these structures, it’s not a panic measure, it’s designed into the structures to deal precisely with that situation where there’s been some shock to the market if you like and there’s a presumption of a valuation adjustment which is quite hard to capture in illiquid assets.”
“Now we are, speaking as the FCA here, we are in very close touch with the firms, let me be clear on that.”
“I think it does point to issues that we need to look at in the design of these things because it comes back to my fundamental point about holding illiquid assets in open end funds that revalue and are required to be revalued .... My own feeling is ... that we will need to come back and look at those.”
Compiled by Kate Holton, Sarah Young, Andy Bruce and Michael Holden