Bank of England slashes interest rates to lowest level EVER of 0.1 per cent and pumps another £200billion into the economy as it ‘throws the kitchen sink’ at limiting coronavirus chaos
- The Bank of England has slashed rates again to a record low of just 0.1 per cent
- Quantitative easing scheme – printing money – expanded by another £200bn
- Analysts said the Bank was ‘throwing the kitchen sink’ at the coronavirus crisis
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The Bank of England slashed interest rates to a record low and pumped another £200billion into the economy today as it fights to contain coronavirus chaos.
An emergency cut has left rates at just 0.1 per cent, down from the 0.25 per cent they were reduced to just a week ago.
It also expanded the so-called quantitative easing programme – which effectively prints money to boost the economy – by £200billion to £645billion.
The move – described as ‘throwing the kitchen sink’ by analysts – comes after Chancellor Rishi Sunak announced a £350billion bailout to try to stop coronavirus lockdown wiping out huge swathes of UK plc.
However, he is under massive pressure to go further, with calls to cancel VAT bills and council tax to avoid mass bankrputcies.
There are warnings that GDP could be hammered by 20 per cent and a million people could lose their jobs within months.
An emergency cut has left rates at just 0.1 per cent, down from the 0.25 per cent they were reduced to just a week ago
The Bank – headed by new governor Andrew Bailey – repeated its warning that the economic impact of the Covid-19 outbreak could be ‘sharp and large’.
Members of the Monetary Policy Committee (MPC) voted unanimously at a special meeting to cut rates and to fire up the money printing presses, by increasing its.
Policymakers have also upped its new Term Funding Scheme support for small firms.
London’s FTSE 100 Index rebounded by more than 1 per cent after the decision, having fallen nearly 140 points earlier in the day.
The Bank said: ‘The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary.’
It added the latest emergency action comes after ‘evidence relating to the global and domestic economy and financial markets’ as stocks plunge at record rates worldwide.
The Bank also said conditions in the UK government bond market have ‘deteriorated’, with gilts hitting new lows due to fears over the impact of coronavirus on growth.
The move comes after the Bank already cut rates from 0.75 per cent to 0.25 per cent last Wednesday in an unscheduled announcement.
Craig Erlam, senior market analyst at Oanda, said the latest measures sees the Bank ‘throw the kitchen sink at coronavirus’.
But he said the rate cut was ‘largely symbolic’, with the reductions so close to zero having little impact in reality on consumer spending power and borrowing costs.
He added it ‘highlights just how little room the Bank has to manoeuvre on the traditional side’.
‘Whether that will be enough to reduce layoffs and stop good businesses going bust, we’ll have to wait and see,’ he said.
The decision to cut rates – the second taken by the Bank of England in just over a week – comes in Andrew Bailey’s first week as governor after he took over from Mark Carney
Mr Bailey – who took over from Mark Carney on Monday – yesterday said he did not rule out handing money directly to households and businesses to cope with the coronavirus crisis.
In an interview with Sky News, Mr Bailey said the ‘Bank of England’s not done’, and signalled it would consider radical moves to keep people financially afloat if necessary.
Chancellor Rishi Sunak and the Bank unveiled a £350 billion package of support for the economy on Tuesday, but many have said it still did not go far enough.
The Bank confirmed the MPC still intends to meet for its scheduled meeting next week, with the decision due on March 26 when it will also release minutes of the latest rates action.