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Bank of England likely to help economy after no-deal Brexit: Carney By Reuters

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© Reuters. Bank of England press conference

By William Schomberg and David Milliken

LONDON (Reuters) – Bank of England Governor Mark Carney said on Tuesday the BoE would probably give more support to the economy if it suffers the shock of a no-deal Brexit, but that the options available to the British central bank would be limited.

The BoE has previously stressed that it would not have an automatic interest rate response to Britain leaving the European Union without a transition deal, which is due to happen in just over a month’s time.

But Carney said the chances of the BoE loosening or tightening monetary policy were not equal.

“Given the exceptional circumstance associated with Brexit, I would expect the committee to provide whatever monetary support it can,” he said in an annual report to lawmakers.

“But there are clearly limits to its ability to do so.”

The BoE has raised rates only twice since the global financial crisis, due to a slow recovery and more recent Brexit uncertainty hanging over the economy, and its benchmark lending rate stands at 0.75 percent, close to the historic low of 0.25 percent.

Prime Minister Theresa May is still trying to find a deal with the EU that can bridge the divide within her Conservative Party, little more than a month before the scheduled Brexit date of March 29.

Media reports on Tuesday said May was poised to rule out a no-deal Brexit and delay Britain’s departure from the EU, sending sterling to it strongest since May 2017 against the euro and topping $1.32 versus the U.S. dollar.

The BoE said on Tuesday it would increase the frequency of its liquidity operations to weekly from monthly in the weeks around March 29, as it did at the time of the 2016 Brexit referendum in order to keep the financial system working.

“This is a prudent and precautionary step,” the BoE said.

CAUTION FROM SOME

In 2016, after British voters opted to leave the EU, the BoE cut rates and ramped up its bond-buying stimulus program to help the economy weather the shock.

Policymakers have said that after a no-deal Brexit they might need to raise rates because the likely sharp fall in the value of the pound, new tariffs, disruption to trade and less investment by companies would stoke inflation pressures.

Carney acknowledged in his report on Tuesday that the BoE’s tolerance of a sustained overshoot of its 2 percent inflation target could be breached and some tightening might be required.

Earlier this month, Gertjan Vlieghe, one of nine Monetary Policy Committee members, broke ranks and said he thought the BoE would need to keep rates on hold or cut them in the event of a no-deal Brexit.

But two other MPC members, speaking alongside Carney to parliament’s Treasury Committee on Tuesday, sounded a note of caution about the risks from inflation after a no-deal Brexit.

Deputy Governor Dave Ramsden said there was little precedent of a similar shock and that inflation expectations in Britain had risen, unlike in the United States and the euro area.

MPC member Jonathan Haskel said he was hesitant that the BoE would be able to make good predictions about inflation.

Carney himself acknowledged that a no-deal Brexit would be inflationary due to new tariffs and trade disruption, and that this would limit the BoE’s ability to soften the economic blow.





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Economy

Fed’s Bostic says significant portions of U.S. recovery are weak or nonexistent By Reuters

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(Reuters) – It will be a while before the U.S. economy is fully recovered and before the Federal Reserve will raise interest rates or remove the support it is providing financial markets, Atlanta Federal Reserve Bank President Raphael Bostic said on Monday.

“On balance, I am comfortable with our current policy stance,” Bostic said in remarks prepared for a virtual event organized for the Securities Industry and Financial Markets Association Annual Meeting. “As I have detailed today, though the U.S. economy continues to show clear signs of recovery, there remain significant portions where the recovery has been weak or nonexistent.”

The Fed moved quickly to support the economy in March by slashing rates to zero and launching emergency lending programs to support market functioning. Those programs will stay in place as long as needed, however, market participants should expect the central bank to sunset some of its emergency lending vehicles after the crisis has passed, Bostic said.

The economic crisis caused by the coronavirus pandemic caused the most pain for Black and Hispanic workers, who were disproportionately affected by job losses, Bostic said. Many of the jobs lost may not return, particularly in travel and food services, as companies adjust to lower demand or use technology to replace workers, he said.

Leaders in economics and finance need to openly acknowledge gender, racial and other disparities and support policies that can help close those gaps, he said. For the Fed, that includes supporting the labor market recovery to minimize the risks of long-term damage, Bostic said.

“Indeed, an unnecessarily slow labor market rebound could just drive historic wedges deeper, continuing to exacerbate the geographic, racial, gender, and income disparities in our economy,” Bostic said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Tolerating higher inflation ‘worth it’ to help achieve employment goals By Reuters

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© Reuters. Outbreak of coronavirus disease (COVID-19) in New York

2/8

(Reuters) – Black and Hispanic workers and others in low-wage jobs were just beginning to see their job situation improve before the pandemic hit, wiping out many of those gains, Philadelphia Federal Reserve Bank President Patrick Harker said on Monday.

The Fed’s new framework should help to address shortfalls in employment, helping affected workers find new opportunities, Harker said.

“No longer will we head off higher inflation by preemptively raising interest rates before we have achieved full employment,” Harker said in remarks prepared for a virtual event organized for the HOPE Global Forum. “Tolerating the risk of slightly higher inflation, in our view, is worth it if it helps us achieve our employment goals.”

Job placement programs can also help people without college degrees move into better-paying roles with more opportunity for growth, Harker said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Pandemic expected to push poorer Americans out of banking system: regulator By Reuters

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© Reuters. FILE PHOTO: Hundreds of people line up outside a Kentucky Career Center hoping to find assistance with their unemployment claim in Frankfort

2/2

By Pete Schroeder

WASHINGTON (Reuters) – Many poorer Americans will struggle to keep a foothold in the banking system due to economic fallout from the coronavirus pandemic after years of increasing access, a U.S. banking regulator said on Monday.

A new report from the Federal Deposit Insurance Corporation (FDIC) found that in 2019 just 5.4% of Americans lacked a checking or savings account, the lowest level recorded by the decade-old survey.

But the watchdog warned that economic havoc wrought by the pandemic could push many struggling Americans, who were already hovering at the fringes, out of the traditional banking system altogether.

“The COVID-19 pandemic is likely to contribute to a rise in the rate of unbanked households,” the FDIC said in its report, noting that banking access usually tracks the broader health of the economy.

The 2019 record low came after years of steady economic gains, and the previous high for unbanked households was in 2011, amid the previous recession. The most frequently cited reason for not having a bank account is insufficient funds to meet account minimums.

The regulator said it could not predict how many people would lose access to bank accounts or be otherwise financially harmed as a result of the pandemic, but flagged some concerning vulnerabilities: In 2019, 35.8% of households reported not saving for unexpected expenses or emergencies. Among unbanked populations, 74% were not able to build up emergency savings.

Complaints to the Consumer Financial Protection Bureau between March and July suggest many Americans are already being pushed to the edge of the financial system by the pandemic.

Between March and April, reports flagging problems such as impaired credit, foreclosure threats and aggressive debt collection tactics, jumped 50% on the year-ago period, according to an analysis by U.S. PIRG and the Frontier Group.

Furthermore, the FDIC found banking activities more commonly relied-upon by rural populations and people with volatile incomes, such as cash transactions and branch visits, had been hindered by lockdowns and vendors limiting the use of bills.

Having a bank account is a critical foothold to building wealth. Those without accounts pay significantly more for basic services, such as cashing checks and making payments – a problem far more likely to affect minority groups. Around 14% and 12% of Black and Hispanic households respectively were unbanked, compared with 3% for whites.

“Millions of Americans – and families of color in particular – remain outside the mainstream banking system and are missing the economic opportunities that come from having a bank account,” said Rob Nichols, CEO of the American Bankers Association, which on Monday launched an initiative to boost the provision of simple low-cost bank accounts.

The 2019 survey found, however, that rapid adoption of new technology is expanding access to financial services. Mobile banking more than doubled as the primary means of accessing a bank account from 2017, and 31% of households reported using a person-to-person payment service like PayPal or Venmo.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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