G7 ministers and central bankers reassure markets, promise liquidity

“We affirm our assessment that the UK economy and financial sector remain resilient and are confident that the U.K. authorities are well-positioned to address the consequences of the referendum outcome,” the group said in a statement issued Friday morning.

Noting that the cratering pound and falling global markets, they added that they have “taken steps” to provide adequate liquidity. “We stand ready to use the established liquidity instruments to that end,” the statement read.

The G7 comprises the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom. Even before Friday morning’s statements, investors anticipated that the Federal Reserve would respond to the market turbulence with easier money.

Treasury Secretary Jack Lew said that he has been in contact with his European counterparts and is closely watching the situation. “The UK and other policymakers have the tools necessary to support financial stability,” he said in a statement from the Treasury.”

In a separate notice, the Fed said that it was “carefully monitoring” markets in the wake of the vote, and that it stood ready to use existing swap lines with foreign central banks to provide dollar liquidity if needed.

Market prices Friday morning suggested that investors now don’t see the Fed raising its short-term interest rate target until early 2018. Earlier this week, bettors had put about even odds on at least one rate hike this year.

The move comes after massive financial market stress overnight, including an 11 percent drop in the pound, a huge one-day move.

The dollar, accordingly, rose significantly, and stocks were set to swoon at the opening of trading Friday. Those factors will be interpreted by the Fed as financial market “tightening,” a development that could reduce U.S. real investment and growth if those conditions are sustained.