* Carney: BoE to give whatever help it can if no-deal Brexit
* Limits to ability of bank to support economy - Carney
* BoE to speed up liquidity operations around Brexit date
* Some MPC members sound cautious about post-Brexit response (Adds comments, background)By William Schomberg and David MillikenLONDON, Feb 26 (Reuters) - Bank of England Governor MarkCarney said on Tuesday the BoE would probably give more supportto the economy if it suffers the shock of a no-deal Brexit, butthat the options available to the British central bank would belimited.The BoE has previously stressed that it would not have anautomatic interest rate response to Britain leaving the EuropeanUnion without a transition deal, which is due to happen in justover a month's time.But Carney said the chances of the BoE loosening ortightening monetary policy were not equal."Given the exceptional circumstance associated with Brexit,I would expect the committee to provide whatever monetarysupport it can," he said in an annual report to lawmakers.
"But there are clearly limits to its ability to do so."The BoE has raised rates only twice since the globalfinancial crisis, due to a slow recovery and more recent Brexituncertainty hanging over the economy, and its benchmark lendingrate stands at 0.75 percent, close to the historic low of 0.25percent.
Prime Minister Theresa May is still trying to find a dealwith the EU that can bridge the divide within her ConservativeParty, little more than a month before the scheduled Brexit dateof March 29. Media reports on Tuesday said May was poised to rule out ano-deal Brexit and delay Britain's departure from the EU,sending sterling to it strongest since May 2017 against the euroand topping $1.32 versus the U.S. dollar. The BoE said on Tuesday it would increase the frequency ofits liquidity operations to weekly from monthly in the weeksaround March 29, as it did at the time of the 2016 Brexitreferendum in order to keep the financial system working."This is a prudent and precautionary step," the BoE said.
CAUTION FROM SOME
In 2016, after British voters opted to leave the EU, the BoEcut rates and ramped up its bond-buying stimulus programme tohelp the economy weather the shock.
Policymakers have said that after a no-deal Brexit theymight need to raise rates because the likely sharp fall in thevalue of the pound, new tariffs, disruption to trade and lessinvestment by companies would stoke inflation pressures.Carney acknowledged in his report on Tuesday that the BoE'stolerance of a sustained overshoot of its 2 percent inflationtarget could be breached and some tightening might be required.Earlier this month, Gertjan Vlieghe, one of nine MonetaryPolicy Committee members, broke ranks and said he thought theBoE would need to keep rates on hold or cut them in the event ofa no-deal Brexit.But two other MPC members, speaking alongside Carney toparliament's Treasury Committee on Tuesday, sounded a note ofcaution about the risks from inflation after a no-deal Brexit.Deputy Governor Dave Ramsden said there was little precedentof a similar shock and that inflation expectations in Britainhad risen, unlike in the United States and the euro area.MPC member Jonathan Haskel said he was hesitant that the BoEwould be able to make good predictions about inflation.Carney himself acknowledged that a no-deal Brexit would beinflationary due to new tariffs and trade disruption, and thatthis would limit the BoE's ability to soften the economic blow. (Writing by William Schomberg;Editing by David Milliken and Alison Williams)
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