The Bank of England (BoE) announced a new measure on Tuesday to soften the financial fallout from the U.K.'s vote to leave the European Union (EU) last month.
The counter cyclical capital buffer rate for U.K. banks was cut with immediate effect to 0 percent from 0.5 percent of financials' U.K. exposure, the BoE said on Tuesday in its biannual Financial Stability Report — the first to be published since the Brexit vote. This will reduce regulatory capital buffers by £5.7 billion ($7.5 billion), raising banks' capacity to lend to households and businesses by up to £150 billion.
"Those U.K. households and businesses who want to seize viable opportunities … can be confident that they will be supported by the financial system," Bank of England Governor Mark Carney said at a media conference on Tuesday. He emphasized that capital buffer measures were only to support domestic banks.
Following the announcement, the U.K. Treasury issued a statement saying the country's main lenders had agreed to use the extra capital to support lending to the real economy.
Governor Mark Carney recalled the central bank's warnings in March that the referendum was the biggest near-term domestic risk to financial stability. "Some of those risks have begun to crystallize," he said.
The Federal Reserve can be patient on raising interest rates due to low inflation and uncertainties over prospects for the U.S. economy, including Britain's vote to leave the European Union, New York Fed President William Dudley said on Tuesday.
"If you strip out the energy sector, inflation is still a little below what we would like... so that allows us to be patient in terms of letting the economy run with accommodative monetary policy in place," Dudley said. "If inflation were higher ... we could probably be a little more aggressive in terms of monetary policy.
"With uncertainties about the outlook and inflation being lower than desired, it allows us to be a little more patient," he said, adding the so-called Brexit vote is among the "clouds on the horizon" for the U.S. economy.
New orders for U.S. factory goods fell in May on weak demand for transportation and defense capital goods, but growing order backlogs and lean inventories suggested the worst of the manufacturing downturn was probably over.
Oil futures settled at their lowest level in roughly a week on Tuesday, pressured by a slowdown in U.S. production declines as concerns over the global economy fed concerns about energy demand.
August West Texas Intermediate crude fell $2.39, or 4.9%, to settle at $46.60 a barrel on the New York Mercantile Exchange. August Brent on the ICE Futures exchange in London lost $2.14, or 4.3%, to end at $47.96 a barrel. Both WTI and Brent marked their weakest settlements since June 27.
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