The Bank of England governor calmed nerves with a £150bn lifeline, but there are many more post-referendum challenges
Bank of England governor Mark Carney faces his second test since the EU referendum this week after calming markets with his promise to underpin the banking system with an extra £150bn of backstop funds.
On Thursday he will join the other eight members of the central bank’s monetary policy committee (MPC), which sets the UK’s interest rate, and ask: is this a time to push up rates to stifle a possible surge in inflation or the moment to cut them as the economy appears to falter?
The British economy ultimately benefited from being driven out of the exchange rate mechanism. But the global economy is a very different place today
In the run-up to the referendum, it was common for Leave campaigners to compare quitting the EU to Britain’s embarrassing but ultimately beneficial departure from the European exchange rate mechanism (ERM) in 1992. The pound tumbled after “Black Wednesday”, and by 1995 the economy had begun to rocket.
George Magnus, a former chief economist at Swiss investment bank UBS, says there is no question the recent fall in the pound will help some companies, “but it’s most unlikely to offset other economic problems the UK is going to encounter”.
The economic consequences of this terrible mistake require us to make an urgent retreat
One should have thought that in the production of Richard III at Islington’s Almeida theatre on the night the referendum results were declared, the cast would have relished the following exchange:
Richard: What news abroad?
Hastings: No news so bad abroad as this at home.