MNI POLICY: BOE To Act As Needed, Strong Int'l Effort Coming

-Carney: BOE Has Limited Room For Stimulus; Emergency Procedures Activated

-Carney: Reasonable to Expect a Combination of Fiscal, Cenbank Measures

By David Robinson

     LONDON (MNI) - The Bank of England will do whatever is needed to support a

UK economy faced with the hit from the coronavirus outbreak, alongside an

international effort that will be "powerful and timely," BOE Governor Mark

Carney told lawmakers.

     The Bank has only limited room to provide stimulus and it was "reasonable

to expect" a powerful mix of fiscal and central bank measures in response to the

coronavirus shock, Carney told the Treasury Select Committee (TSC).

     The following are key points from Carney's evidence:

     -Carney did not rule out a rate cut before the next scheduled announcement

on March 26. "The MPC in its history has always acted in a timely way and

certainly once it has amassed the information, the analysis and can form the

judgements." The handover to his successor Andrew Bailey mid-month does not

cloud the picture for near-term action by the MPC, Carney said.

     "The transition will have no impact on the conduct of policy," he said.

     -Carney said the BOE was in regular contact with their international

counterparts and Treasury officials and it was "reasonable to expect" a mix of

monetary and fiscal measures. There has been a lot of speculation that G7

finance ministers and central bankers are set for a collective conference call

later Tuesday.

     -The BOE Governor said that "the headline shock from coronavirus could be

large" and that it was plausible that the demand impact could be greater than

supply impact in the near term.

     The conventional assumption is that central banks can do little, if

anything, to offset supply shocks but can help offset demand shocks, and

Carney's comments give the green light to monetary stimulus.

     "We are considering a variety of policy options" and "we are sighted on the

policy options the Treasury is considering" he said.

     "We will come to quick conclusions on the appropriate stance of

policy,"Carney said.

     -Carney restated the MPC's opposition to lowering Bank Rate, currently at

0.75%, down into negative territory. He left the door open to fresh quantitative

easing and made clear that the Bank, along with the Treasury, was looking at

measures to ensure that businesses did not go under as a result of a temporary

coronavirus hit.

     -The BOE Governor stressed that the scope for monetary policy action was

restricted, although MPC members speaking to the Treasury Committee said the

policy space it still had to utilise amounted to an equivalent of 200 to 250

bps, combined between rate cuts, QE, targeted lending schemes and forward

guidance.

     -Deputy Governor Dave Ramsden supported the line that the focus is on

finding ways to get through the current shock, saying liquidity operations and

other financial support measures would be taken "Very much with a view to

bridging through temporary shock on coronavirus." In his written evidence

Ramsden said that looking beyond the short-term, monetary tightening could be

required if the economy recovered as expected.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,M$$BE$,MFB$$$,MGB$$$]