March 2, 2020 / 9:30 AM / a month ago

Bank of England to work with other central banks on coronavirus

LONDON (Reuters) - The Bank of England is working with international partners and Britain’s finance ministry to ensure “all necessary steps are taken” to offset the economic hit from coronavirus, it said on Monday, echoing other central banks around the world.

FILE PHOTO: The Bank of England logo is seen on a lectern during the launch event for the new note design at the Turner Contemporary gallery in Margate, Britain, October 10, 2019. Leon Neal/Pool via REUTERS

With financial markets steadying after signs of economic stimulus from Japan to the United States, the British central bank said it was assessing the potential impact of coronavirus on the economies and financial systems of Britain and the world.

“The Bank is working closely with HM Treasury and the FCA (Financial Conduct Authority) - as well as our international partners - to ensure all necessary steps are taken to protect financial and monetary stability,” the BoE said.

The heads of the U.S. Federal Reserve and the Bank of Japan have told investors that the central banks they lead will take steps necessary to respond to the spread of coronavirus.

The Organisation for Economic Cooperation and Development said on Monday the outbreak is plunging the world economy into its worst downturn since the global financial crisis and urged government and central bank action to avoid a steeper slump.

The yield on two-year British government debt GB2YT=RR, which is sensitive to interest rate speculation, fell to its lowest since September 2017, while the FTSE 100 index of blue-chip companies was up 1.1% at 1037 GMT.

Samuel Tombs, an economist with Pantheon Macroeconomics, said he expected the BoE would cut its benchmark rate to 0.5% this month from 0.75%, possibly before its next scheduled policy announcement on March 26.

“Liquidity operations likely will form part of the stimulus package too,” Tombs said. “Nonetheless, we think the BoE will signal that the rate cut is a temporary measure which will be reversed soon after virus-related disruption has faded.”

Britain’s economy has shown signs of a pick-up since Prime Minister Boris Johnson’s election win in December, although a survey showed on Monday that the spread of coronavirus had led to a big jump in delays for parts for factories.

BoE Governor Mark Carney said on Friday that Britain would be unable to avoid an economic hit from the spread of coronavirus. A day earlier Deputy Governor Jon Cunliffe said there was a limit to what the central bank could do to help.

British finance minister Rishi Sunak is due to announce the first budget statement of Johnson’s new government on March 11, which is expected to include higher public spending.

On SundayItaly announced 3.6 billion euros ($3.5 billion) of measures to help its economy withstand Europe’s largest coronavirus outbreak.

The FCA, Britain’s financial markets watchdog, said it was working closely with the financial services sector to ensure it was responding effectively to the outbreak.

“This is in conjunction with the Bank of England,” the FCA said. “As you would expect we have been in contact with a wide range of firms across the sector.

“We expect all firms to have contingency plans in place to deal with major events so that they are able to continue operating effectively. And, as part of that, to consider how best to support their customers.”

Writing by William Schomberg; editing by Kate Holton and Catherine Evans

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