The Bank of England said it will take "all necessary steps" to mitigate the impact of the COVID-19 virus outbreak on the U.K. economy.
Speaking Tuesday to the U.K. Treasury Select Committee regarding Bank of England monetary policy reports, Gov. Mark Carney first addressed the steps being taken by the central bank to address the virus and its impacts.
"The Bank of England's role is to help U.K. businesses and households manage through an economic shock that could prove large but will ultimately be temporary. The Bank will take all necessary steps to support the U.K. economy and financial system, consistent with its statutory responsibilities," he said.
Mr. Carney said the Bank is in "frequent contact with our international peers," including those at the G7, G20 and International Monetary Fund.
The bank is "considering a variety of policy options," he said. "We will come to quick conclusions about the appropriate stance of policy and make them at the appropriate time. And ... both domestically and internationally, we think that the collective response will be both powerful and timely."
He said there is 75 basis points of conventional room to move in monetary policy — the U.K.'s interest rate is currently 0.75% — and with that, adding in the potential impact of quantitative easing, "We have effectively 200 to 250 basis points of space."
Contingency plans are in place across the Monetary Policy Committee, which is assessing economic impacts and considering policy implications of various scenarios; the Financial Policy Committee, which is considering macro-financial impacts such as a spillover to how the market functions; and the Prudential Regulation Committee and Financial Market Infrastructure supervisors, which are reviewing bank, insurer and financial market infrastructure contingency plans.
The bank is also reviewing its own operations and contingency plans.
He said, however, there are important differences between the current situation and the 2008 global financial crisis.
"Where we have direct responsibility for the financial system, it is an entirely different place. It is part of the solution, not part of the problem. Part of our job is to make sure that we maximize the value of that resiliency with the policy tools that we have, and that's what we're thinking through right now."
U.K. stock markets were up about 2% at midday Greenwich Mean Time.
In the U.S. early Tuesday, the Federal Reserve made an emergency half-percentage point interest rate cut to protect the longest-ever economic expansion from the spreading COVID-19 virus.
Also Tuesday, the Reserve Bank of Australia cut interest rates by 25 basis points to 0.5%. A statement on the Australian central bank's website said the decision was made "to support the economy as it responds to the global coronavirus outbreak."
