- BoE to keep the interest rate at a record low of 0.1%
- Yellen: ‘’We must make sure that investors are protected’’
- Italy’s new hope: Mario Draghi as the PM
BoE to Keep the Interest Rate at a Record Low of 0.1%
The Bank of England left the policy rate unchanged at 0.1 percent, while keeping the asset purchase program unchanged at £ 875 billion. Stating that the economic outlook is still uncertain, the bank said that the current monetary policy stance is in line with the conditions.
The central bank said that they expect the UK economy to shrink by 4 percent in the first quarter of 2021, and stated that they do not intend to tighten monetary policy unless conditions improve.
The Central Bank also called on banks to start preparing for negative interest rates, but it was stated that this call does not mean a rapid turn in policy. Authorities have been considering options for a negative rate policy for nearly a year. As a result of the consultations with the banks, it was concluded that the implementation of negative interest application within 6 months will bring operational risks to the agenda.
Many banks said their retail banking systems were “not built to accommodate a negative bank rate, and substantive changes would need to be made,” Sam Woods, who heads the PRA ( Prudential Regulation Authority), said in a letter to financial executives that was released Thursday. He didn’t specify any banks by name.
The committee confirmed that the Covid-19 vaccine programs are strengthening the economic outlook and that financial markets have remained stable since the MPC’s last meeting. In addition, the bank reported that there would be a “rapid” recovery in GDP towards pre-pandemic levels this year, due to the vaccination programme.
However, the BoE outlined that the outlook for the economy remains “unusually uncertain, and that it depends on the evolution of the pandemic, measures taken to protect public health and how households, businesses and financial markets respond to these developments”.
The pound rose in anticipation that a negative interest rate policy would not be implemented anytime soon.
Yellen:‘’We Must Make Sure That Investors are Protected’’
US Treasury Secretary Janet Yellen answered questions on the agenda in a television program she attended.
Yellen stated that she will hold a meeting with regulators regarding the excessive volatility in the markets in recent weeks, and that they will evaluate the latest developments with officials from the US Securities and Exchange Commission (SEC), the US Federal Reserve (Fed) and the US Commodity Futures Trading Commission (CFTC).
“We really need to make sure that our financial markets are functioning properly, efficiently and that investors are protected,” Yellen said in an interview Thursday on ABC television’s “Good Morning America” before she leads a snap meeting of top regulators.
Jant Yellen said that before she and the financial market regulators take any action, they should “deeply understand” investors’ keen interest in shares, including GameStop’s GME.N.
“We’re going to discuss these recent events and discuss whether or not the recent events warrant further action.”
“We’re at a point in our history when we’re faced with not one but two crises — a pandemic that has impaired the health of Americans and an economic crisis that is as serious as any I’ve seen in my lifetime — and I want to make sure that Americans don’t suffer needlessly and that we attend to their needs,” she added.
Yellen stated that she wanted to cooperate with US President Joe Biden to ensure the application of the stimulus package to meet these needs, and she wanted to ensure that the package in question was implemented.
Saying that the stimulus package addresses the needs of families with children, Yellen said, “It is estimated that this package can reduce child poverty by 50 percent.”
While there are more than 10 million jobless people in the world’s largest economy, Yellen said 18 million people still claim unemployment insurance. “Seeing long lines of people waiting to get food around the country is something we should never see in the United States,” she added.
Italy’s New Hope: Mario Draghi as the PM
Following the recent resignation of Prime Minister Giuseppe Conti in Italy, Italian President Sergio Matarella offered the former head of the European Central Bank (ECB) Mario Draghi to form a government to solve the political crisis in Rome. Known for resolving crises, 67-year-old politician Mario Drahgi, nicknamed “Super Mario”, accepted the offer.
It was reported that Mario Draghi accepted a mandate from Italy’s president to try and form a new unity government that would guide the country out of the pandemic and through economic recovery. When it was revealed that Draghi would be assigned as the PM, comments started coming from the Italian press saying: “Super Mario will try to save Italy too”.
Draghi, who served as the General Director of the Treasury and the President of the Central Bank during Italy’s economic crisis in 2012 , took part in the preparation of the agreement which sets the basic rules of the euro project. After it, he was treated as the ‘person who saved the euro’ during the financial crisis in the Eurozone. That is where the nickname ‘’Super Mario’’ comes from. Although Draghi’s term in ECB is over, the low interest policy still continues.
Italy is perhaps in its most dangerous era since the Second World War, facing a multi-front struggle over health, the economy, and significant social paralysis and frustration. The nation is expected to receive more than EUR 200 billion in relief funds from Europe, or roughly US$240 billion.
“To overcome the pandemic, to complete the vaccine campaign, to offer answers to the daily problems of the citizens, to relaunch the country are the challenges we face,” Mr. Draghi said after meeting with President Sergio Mattarella for more than an hour at the Quirinal Palace.
Italy, he said, faced a “difficult moment.” And he said he had accepted Mr. Mattarella’s appeal because the emergency “requires an answer equal to the seriousness of the situation.”
Draghi also emphasized that his primary goal would be to obtain full parliamentary support, adding that he was “confident” that a productive dialogue with all parties would lead to a united response to the needs of the country.
Political observers in Italy see economist Draghi as the person who can take the country out of its long-standing economic and health crisis. Draghi is primarily expected to find a solution to the dispute over the EU Restructuring Fund, which caused the government to collapse.