BOE Could Tweak Fiscal Policy to Support Any Potential Downturn in British Economy After Brexit
According to Governor Mark Carney, the Bank of England could consider rolling out stimulus measures in case it sees the British economy weakening further and slipping into a recession. Carney explored various means available with the central bank to support the economy in the event of a downturn while speaking at an event in Harvard University.
The BOE could reduce the countercyclical capital buffer from the current 1% to 0 for banks if the British economy weakens considerably in the aftermath of Brexit. Although the threat of a no-deal Brexit has faded, there remains no clarity yet on how the economy will react once Britain leaves the EU on October 31.
Previously, Britain’s Finance Minister Sajid Javid had broached the idea of increasing public investment in infrastructure as a possible way to strengthen the idea post Brexit. While individual measures may not suffice, tweaking the fiscal policy was an inevitable step governments should begin with to boost economic growth.
Carney’s comments align with recent recommendations from the IMF on how governments should leverage fiscal stimulus policies by central banks to boost investment in skill development to offset the effects of a potential economic slowdown.
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