Bank of England Cuts Interest Rates, Bolstering Markets
The move sees borrowing costs reduced to their lowest level in history.
The Bank of England has announced a cut to interest rates on Wednesday morning in a bid to safeguard the UK economy amid the coronavirus epidemic.
Rates have been reduced from 0.75% to 0.25%, and the BoE has also reduced a key capital buffer to 0%, which it claims will enable banks to better “supply the credit needed to bridge a potentially challenging period.~
Mark Carney, the Bank of England’s outgoing governor, said that the move was intended to combat a “sharp fall in trading conditions”, including a decrease in spending on non-essential goods. However, he said in the statement that the UK economy is on course to shrink in the coming months.
“I would emphasise the direction is clear, though the orders of magnitude are still to be determined” he said.
European markets have already seen an increase in value following the Bank of England’s measures. The FTSE climbed by roughly 1.1%, while Germany’s DAX and France’s CAC 40 rose by 2% and 2.3% respectively.
This market upturn may reflect optimism in Wednesday’s Budget release, which is expected to contain further measures to support growth in the UK economy.
Mr Carney confirmed that the timing of the rate cuts was by design, stating that the action was taken on Budget day to co-ordinate for “maximum impact”.