On 29 June 2016 and 30 June 2016 respectively, the Economic Secretary to the Treasury, Harriett Baldwin, and the Governor of the Bank of England, Mark Carney, delivered speeches addressing the UK’s decision to leave the European Union.
Key points highlighted in Ms Baldwin’s speech include:
- The electorate has taken a ‘clear democratic decision’ and the financial markets can weather these challenges.
- Since the financial crisis in 2008, the Government and the banking industry have worked towards a safer and stronger banking sector, followed by some fundamental reforms. As a result of these actions, the institutions have sufficient capital and liquidity to deal with the market volatility.
- The Government was prepared for this outcome. These preparations include discussions with the Finance Minister and Central Bank Governors of the G7 to provide a co-ordinated response.
- Confidence must not be shaken. Ms Baldwin listed the strengths of the UK market.
- Ms Baldwin concluded with the message that the British economy is strong, highly competitive and ‘open for business’.
In the speech delivered by the Governor of the Bank of England, Mark Carney recommended the objectives for policymakers to be as follows:
- To conduct a sober, objective assessment of the outlook and the risks associated with it.
- To develop and communicate a plan to reduce those risks and seize new opportunities. In the Bank’s view this includes a comprehensive strategy for engaging with the EU and the rest of the world.
- To minimise any possible confusion about the commitment to core macroeconomic policy frameworks themselves.
Some of the additional key points addressed in the speech include:
- A reminder of the Bank’s initial commitments, including the provision of £250 billion of additional funds, if required.
- The material slowing in growth identified by the Monetary Policy Committee (MPC) as a risk associated with the referendum, now looking to be the Bank’s central forecast.
- The deteriorated economic outlook likely to require monetary policy easing over the summer. The MPC will make an initial assessment on 14 July 2016, with a full assessment and a new forecast following in the August’s Inflation Report.
In concluding, Mr Carney confirmed that in working closely with the Chancellor and HM Treasury, the contingency plans put in place for the initial market shocks are working well. Mr Carney highlighted, however, that part of these plans is ruthless truth telling, with one uncomfortable truth being the fact that there are limits to what the Bank can do.