Bank of England has 'ammunition' to tackle economic effects of coronavirus: Governor

[LONDON] The Bank of England still has "a lot of ammunition" to tackle the economic effects of the growing coronavirus epidemic, despite the country's already low interest rates, governor Mark Carney said on Thursday.

Mr Carney, whose term at the head of the central bank ends in 10 days, said the BoE had more tools at its disposal than when it tackled the global financial crisis in 2008.

Beyond tightened banking regulations, with higher levels of equity now demanded from institutions than twelve years ago, Mr Carney added that the key interest rate, currently at 0.75 per cent could be further lowered by 75 basis points to zero.

The Bank of England could also use "the combination of asset repurchases and a special mechanism for granting liquidity," Mr Carney told an audience at University College London.

The reassuring tone is a change from the one Mr Carney adopted in early January when he said: "It's generally true that there's much less ammunition for all the major central banks than they previously had."

On Tuesday, Mr Carney insisted that the Bank of England would "take all necessary steps" to support the UK economy from the fallout of the novel coronavirus which has skilled over 3,300 people worldwide.

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Britain's chief medical officer announced the first UK fatality on Thursday.

Mr Carney's comments on Tuesday came just hours before the US Federal Reserve led the charge in the global response to the growing economic risk posed by the coronavirus, slashing its key interest rate by a half point to a range of 1.0-1.25 per cent, its record low.

Many analysts are now awaiting a rate drop by the Bank of England directors at their next meeting in late March, or even before.

Canada-born Carney said on Tuesday that he was in "continual contact" with his BoE successor Andrew Bailey, who will take over on March 16.

AFP