Carney defends attacks on recession warning and Brexit bazooka

Jake Cordell
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Carney came under fire from MPs over the Bank of England's warnings about a recession
Carney came under fire from MPs over the Bank of England's warnings about a recession (Source: Getty)

Mark Carney has issued a robust defence over the Bank of England's conduct in the run-up to the EU referendum and its decision to unleash a massive post-vote stimulus package.

Addressing MPs who criticised the governor for "over-egging" the possibility of a vote to leave the EU plunging the UK into turmoil, Carney said: "I am absolutely serene about the comments made by both the Monetary Policy Committee (MPC) and the Financial Policy Committee (FPC)."

Read more: Will Mark Carney's corporate bond buying help the UK economy?

He also defended the extensive contingency planning undertaken by the Bank ahead of the vote along with the decisions it has taken since. These included the announcement of £150bn of emergency funding hours after the result was announced, a cut to capital requirements for banks, the slashing of interest rates, committing to printing £70bn of cash in a new quantitative easing programme, and unlocking £100bn worth of cheap loans for banks.

The Bank of England's Brexit bazooka

  1. Interest rates cut to 0.25 per cent - their lowest ever level in the Bank’s 322-year history
  2. Another £60bn of government bond purchases - taking the total stock to £435bn
  3. A new £10bn corporate-bond buying package, similar to the programme being undertaken by the European Central Bank (ECB)
  4. £100bn of cheap loans for banks to push down interest rates, funded by printing new cash
  5. Cutting the countercyclical capital buffer which would have required banks to keep more cash on their balance sheet
  6. £150bn of emergency liquidity for banks to make sure lending does not dry up

The bank governor, speaking in front of the Treasury Select Committee, said: "I welcome signs of stabilisation in the economy. Liquidity pressures that were met because of the contingency measures that we had taken in response to the judgement of the MPC absolutely validated the steps that we and other central banks around the world have taken."

"Subsequent to the actions of the MPC," Carney said there "is less of a risk" that the UK economy will fall into a technical recession.

Read more: Mark Carney for PM?

However, Carney said the UK still faced a heightened period of economic uncertainty in the wake of the vote.

"Growth is running at about half the rate before the referendum. There are scenarios where the economy does not grow or shrinks for a period."

The governor, and fellow MPC members Jon Cunliffe, Kirstin Forbes and Gertjan Vlieghe, also insisted more stimulus could be on the way if growth stumbles towards zero over the rest of the year.

"We're very much not out of ammunition, nor are we trigger happy," Carney said.