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Brexit, Europe, technical analysis

From Grexit to Brexit. Central banks always a step ahead of referendums and elections

Stefano Francesco Fugazzi (ABC Economics) – The Bank of England has become caught in the increasingly bitter EU referendum debate after Governor Mark Carney was forced to reject accusations that Threadneedle Street was being too supportive of the government’s pro-EU line.

The row follows Monday’s announcement that the Bank of England will offer three additional Indexed Long-Term Repo (ILTR) operations in the weeks running up to the referendum on Britain’s membership of the European Union.

The purpose of the ILTR operations is to pre-empt any shocks to financial markets around the time of the vote.

Although Carney confirmed that Threadneedle Street would not make any attempt to influence voters on their decision to remain inside or outside the EU, the Bank of England’s independence came under increased scrutiny.

It is not uncommon for central banks to act ahead of or concurrent with general elections (or referendums) with potentially destabilising outcomes.

As observed by ABC Economics last year (Politics and monetary easing, ECB playing tricks on markets with TLTRO e QE), in the Euro area the ECB announced the targeted longer-term refinancing operations (TLTROs) and Quantitative Easing (QE) programmes on/before the European Parliament and the Greek general elections, respectively in 2014 and 2015.

See charts below and Politics and monetary easing, ECB playing tricks on markets with TLTRO e QE for more details.

monetary easing 1 monetary easing 2 monetary3




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