LONDON, March 3 (Reuters) - Bank of England Governor Mark Carney and other members of the central bank’s Monetary Policy Committee spoke to lawmakers in Britain’s parliament on Tuesday, focusing mainly on the coronavirus outbreak. Below are highlights of their comments.
CARNEY: VIRUS WILL CAUSE ECONOMIC DISRUPTION NOT DESTRUCTION
“The 2007-2008 crisis caused some lasting scarring effects on the economy. The prospect with this situation is that we will have disruption not destruction.
“And that’s the focus of policy, should be the focus and will be the focus of policy.
“The shock could be large ... but the persistence of that impact should be different, can, should, I’d like to say will but it partly depends on the reaction, be different.”
CARNEY: CONFIDENT OF “POWERFUL AND TIMELY” RESPONSE
“The lines of communication globally between central banks are wide open, the lines of communication between ourselves and the Treasury are operating exceptionally well.
“It is reasonable to expect a response that reflects a combination of fiscal measures and central bank initiatives.
“Now across jurisdictions there will some difference in the exact form of those measures and the exact timing, but the response will share a common goal which is to achieve this bridging, and support the economy through a potentially challenging period.
“We are confident that collectively these measures both within jurisdiction and across jurisdictions will be both powerful and timely.”
“I would see 250 basis points of potential policy action as significant and alongside what other authorities might do then that can make a significant contribution to the economy.
“Individual policies work, whether they’re conventional or unconventional, across a range of countries, but when you put them together in packages with the correct communications you can get more bang for your buck.”
CARNEY: MPC WILL MOVE ON INTEREST RATES AT APPROPRIATE TIME
[Question: Could you possibly contemplate a change to interest rates before the March meeting of the MPC?]
“(If you look at) the MPC’s history, (it) has always acted in a timely way, and certainly once it has amassed the information, the analysis that inform the judgment.
“I don’t want to bind the hands of the committee in terms of any specific timing, but I refer back to my opening statement that Andrew Bailey, who will be taking on this role from the middle of March, and I, are in constant contact. The transition will have no impact on the conduct of policy.
“The committee will make a decision at the appropriate time but not before.”
“We have run, last couple of years, severe China slowdown and Hong Kong slowdown stress tests, that’s just the shock, we assume a shock, not this specific one, that emanates from greater China, that then propagates through the global economy, has very severe effects on financial markets, different effects from what we are seeing.
“(The tests model) the opposite of what we are seeing right now; we are seeing government bond yields falling quite substantially, which provides some stimulus to the economy if it persists, as one example.
“And while we have seen a repricing of risk assets, we haven’t seen anything like the orders of magnitude that we ran through the tests.”
“The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large but will ultimately be temporary.
“The bank will take all necessary steps to support the UK economy and financial system consistent with its statutory responsibilities.
“We are monitoring the situation closely across all our functions and ensuring all necessary contingency plans are in place.
“The Monetary Policy Committee (MPC) is assessing the economic impacts and considering the policy implications of various possible scenarios, including the extent to which supply disruptions have aggregate demand consequences via cash flow, cost and availability of finance, as well as confidence effects.
“The Financial Policy Committee (FPC) is examining macro-financial impacts including spillovers to market functioning and how to address any possible constraints on financing to UK businesses and households that might emerge.
“The FPC, MPC and PRC (Prudential Regulation Committee) met jointly yesterday to review a range of macroeconomic and financial system scenarios and their implications, and they will continue to meet as needed and will act as appropriate.
“Andrew Bailey and I are in continual contact on the whole range of issues consistent with our statutory duties and in order to ensure a smooth transition on 16 March.
“The Chancellor and I have had a series of discussions, and Bank officials are in regular contact with their counterparts at HM Treasury and the FCA.
“We are in frequent contact with our international peers, including at the G7, G20 and IMF.”
“Wholly unacceptable situation and as you can appreciate subject to an investigation by the FCA which limits exactly the extent to which I can go into it.
“We referred (to the FCA) the incident and the parties involved in the incident which would include not just the technical party related to the audio link but the parties who used the information.
“We will release the findings of the report (into the breach) and management response (in April).
“We’ve also asked the FCA to look at this behaviour of market participants relative to their responsibilities under both the FX code and the money market code.” (Reporting by Paul Sandle and Estelle Shirbon)