Brexit: Bank of England Governor signals interest rate cut

Summer tipped for rate cut by Governor as he pledges he won't "walk away" from the job

The Bank of England is likely to cut interest rates over the summer to combat a post-Brexit vote slowdown, the Bank's Governor, Mark Carney said today.

The Governor's words, in a speech at the Bank's Threadneedle Street headquarters, sent the pound instantly and sharply down against the dollar as financial market traders responded to the news of the stimulus.

Ten year government bond yields also plummeted.

"In my view, and I am not pre-judging the views of the other independent MPC [Monetary Policy Commitee] members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer."

Mr Carney suggested that a move to lower the cost of borrowing could come as early as July.

"The Committee will make an initial assessment on 14 July, and a full assessment complete with a new forecast will follow in the August Inflation Report. In August, we will also discuss further the range of instruments at our disposal."

Mr Carney described the British people's decision to leave the European Union as a "major regime shift" that would have far-reaching economic effects.

"In the coming years, the UK will redefine its openness to the movement of goods, services, people and capital. In tandem, a potentially broad range of regulations might change" he said.

However, the Governor sought to calm households and businesses about the pain of the transition.

"The UK can handle change" he said. "It has one of the most flexible economies in the world and benefits from a deep reservoir of human capital, world-class infrastructure and the rule of law. Its people are admired the world over for their strength under adversity. The question is not whether the UK will adjust but rather how quickly and how well."

The Governor was accused by senior figures in the Vote Leave campaign of crossing a political line when he highlighted the the likely negative economic impact of a Brexit vote. Andrea Leadsom, the Conservative MP who is running to be Conservative leader and was on the Vote Leave campaign committee, suggested Mr Carney was influenced by his former employer Goldman Sachs.

Asked by The Independent whether he could work with such individuals if they came to power Mr Carney said: “I would be irresponsible of me, or any of my colleagues, to walk away because those are our responsibilities under statute”.

Mr Carney also struck a defiant tone about the forecasts the Bank had made. “What we said in terms of the risks to the economic outlook, in terms of the risk to financial stability, does anyone in this room think those risks have not begun to manifest? We did our job.”

As the Governor spoke sterling fell almost 1.5 cents to $1.3259. 10 year Gilt yields slumped to a new record low of 0.784 per cent. The FTSE 100 also gained, ending up 2.27 per cent at 6504.33.