New UK finance minister Hammond says to work with BoE on Brexit response

[LONDON] British finance minister Philip Hammond said on Tuesday he would work closely with the Bank of England to help steer the economy through the shock of last month's referendum vote to leave the European Union.

Mr Hammond, who was named as chancellor of the exchequer by Prime Minister Theresa May last week to replace George Osborne, said the immediate response to Brexit slowdown lay with the BoE while he would spell out his fiscal plans in the autumn.

"The initial response to this kind of a shock must be a monetary response delivered by the Bank of England," Mr Hammond told lawmakers. "And the governor, in announcing that interest rates were not to be lowered last week, did make it clear that the Bank is developing a monetary package that it will announce in due course."

The BoE said on July 14 it was working on a possible package of measures to be announced on Aug 4 to cushion the expected blow from the referendum result to Britain's economy.

Many economists expect it will halve its already record low Bank Rate to 0.25 per cent and possibly revive its bond-buying programme. Some have also speculated that the BoE might buy bonds issued specifically to fund infrastructure spending.

In his comments to parliament on Tuesday, Mr Hammond said Britain needed a new framework to address its budget deficit, which he said was "very large" and needed to be addressed.

Britain's budget deficit stands at around 4 per cent of gross domestic product, down from more than 10 per cent in 2010 but still among the largest of rich nations around the world.

Mr Hammond reiterated his aim of protecting Britain's huge financial services industry from the Brexit fallout by securing its continued ability to provide services across the EU, and he said Britain would not be open to "asset strippers" seeking to buy companies in the country.

REUTERS