Mark Carney, governor of the Bank of England (BOE) speaks during a news conference at Bank Of … [+]
Topline: The Bank of England has made an emergency rate cut of 50 basis points, bringing the interest rate to 0.25%, matching record lows, in a bid to soften the economic shock of Covid-19.
- The U.K’s central bank brought interest rates down on Wednesday from 0.75%, to 0.25%, matching the lowest level ever set that were last seen in the aftermath of the EU referendum in 2016. It is also the biggest rate cut since 2009.
- The Bank of England’s (BoE) monetary policy committee was scheduled to meet towards the end of the month, but for the first time since the financial crash in 2008, it made the emergency cut outside its schedule.
- The BoE said in a statement: “Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months.”
- It also announced it would free up $245 billion (£190 billion) in extra lending for banks to support small and medium businesses.
- The pound rebounded against the euro and dollar after an initial fall on Wednesday, while the U.K.’s FTSE 100 reacted positively, up 2% early on Wednesday.
- There have been more than 380 confirmed cases of coronavirus in the U.K. to date, and six deaths.
Crucial quote: Outgoing BoE governor Mark Carney said at a press conference: “The reduction in bank rate will help bolster confidence at this difficult time.”
What to watch for: Britain’s finance minister, Rishi Sunak is set to deliver the Budget later today, which has already been dubbed the “coronavirus budget” by some media outlets. The Chancellor, who was only appointed last month, was already expected to splurge on infrastructure spending but is tipped to boost spending on health services and small businesses to address the impact of Covid-19.
Key background: The move follows an emergency rate cut by the U.S. Federal Reserve and the Bank of Canada last week, while the European Central Bank is expected to announce a cut on Thursday, with chief Christine Lagarde suggesting that Europe risks a major economic shock similar to 2008. A number of central banks around the world have pledged stimulus measures to shore up economies against the impact of the pneumonia-like virus, which has lead to quarantine measures and travel restrictions that has kept tens of millions of people away from work for weeks.
Tangent: Nadine Dorries, a British health minister, was the first U.K. lawmaker to test positive for coronavirus and is now self-isolating.