Pound Remains Lower After BOE Steps Up Crisis Response
The pound remained lower versus the euro after Chancellor of the Exchequer George Osborne disclosed joint steps with the Bank of England to increase the flow of credit amid a deteriorating outlook in Europe.
The U.K. central bank will activate an unused plan to inject at least 5 billion pounds ($7.8 billion) a month into the financial system. Another plan will allow lenders to swap assets with the central bank in return for money to be lent to companies and households. The Treasury will indemnify the bank for any losses.
Sterling weakened 0.3 percent to 81.18 pence per euro at 4:19 p.m. in New York. The U.K. currency was 0.3 percent higher at $1.5556 and down 0.2 percent to 123.44 yen.
The new measures were announced after record low official interest rates and a so-called quantitative easing program failed to bring down borrowing costs that lenders charge to companies and households. The central bank has said the turmoil in the euro area, Britain’s biggest trading partner, poses the biggest risk to the economy and financial stability.
“We are not powerless in the face of the euro-zone debt storm,” Osborne told financiers in his annual Mansion House speech in London today. “The government -- with the help of the Bank of England -- will not stand on the sidelines and do nothing as the storm gathers.”
The plans mark a departure for the central bank, which has so far resisted calls for targeted measures to boost lending to the non-financial sector. Deputy Governor Paul Tucker, a contender to become governor when King’s term ends next year, signaled this week that the bank had eased its stance.
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