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UPDATE 3-New BoE governor Bailey promises more "prompt action" when needed

Mon, 16th Mar 2020 12:33

* New BoE boss Bailey says public can be assured of action

* BoE "very keen" to avoid permanent hit to economy

* Investors speculating BoE could cut rates before March 26

* Bailey: Sunday's liquidity move was strong coordination
(Adds detail from Bailey)

By Andy Bruce and Elizabeth Howcroft

LONDON, March 16 (Reuters) - New governor Andrew Bailey
promised that the Bank of England would deliver further "prompt
action" when needed to help Britain's economy weather the hit
from the global coronavirus pandemic.

Bailey, who succeeded Mark Carney as governor on Monday,
told BBC News that the BoE was "very keen" to ensure that
short-term damage to the economy did not permanently damage
Britain's longer-term growth prospects.

"That's why you saw prompt action last week, that's why you
will see prompt action again when we need to take it, and the
public can be assured of that," he said in his first public
comments since taking over as governor.

On Wednesday last week, the BoE launched emergency credit
measures to prevent a wave of corporate bankruptcies, and cut
its key interest rate to 0.25% from 0.75%.

A few hours later, new finance minister Rishi Sunak
announced a surge in public spending .

On Sunday, the BoE joined the U.S. Federal Reserve and four
other major central banks to make it easier for banks to access
U.S. dollar liquidity.

Investors are watching for signs that the BoE will take
further measures to help the world's fifth-biggest economy
before its next scheduled announcement on March 26, even though
its room for manoeuvre has been reduced by last week's action.

Economists say the BoE could trim rates to just above zero
and expand its purchases of government bonds and corporate debt.

Some have even raised the prospect of more radical policies
such as "helicopter money" -- giving newly created money
directly to households -- depending on the severity of the
downturn.

Bailey, who was accused by lawmakers of being slow to react
to banking and fund management scandals in his old job as head
of Britain's Financial Conduct Authority, told parliament this
month that he was nimble and dextrous enough to be BoE governor
during times of global strife.

He pointed to his record during the financial crisis, when
he spearheaded the BoE's bank rescue packages.

STRONG COORDINATION

In his interview with the BBC, Bailey said the move on
Sunday by six central banks, including the BoE, to provide cheap
U.S. dollar funds to the financial system came in response to
some "pretty big dislocations" in markets.

"We're going to see how that works its way through the
markets today (and) in the coming days to see what the effect
is, but I would emphasise that this is strong coordination among
central banks."

The Fed cut its main lending rate to just above zero on
Sunday.

Bailey also said he had ambitions for the BoE that go beyond
protecting the economy from the coronavirus outbreak.

"Obviously we're going to have a new relationship with the
European Union, we've got very important issues in the world of
financial technology and how the system adapts to that, and how
the Bank of England adapts to that, frankly."

He added that he wanted to the BoE to be represented better
across the country as a whole.

"Of course, in the initial period, obviously it's going to
be very, very focused on the response to COVID," Bailey said.

"We need to get through that period."
(Reporting by Andy Bruce; editing by David Milliken and Kevin
Liffey)

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