Following on from the interest rate cuts announced last week from 0.75% down to 0.25%, the Bank of England (BOE) announced a further cut to 0.10%. The lowest in the 325 year history of the bank.
The latest move was announced by Andrew Bailey, the new governor of the BOE . In his first week as the governor Mr Bailey has acted swiftly in order to calm the markets that have been on high alert amidst rumours of a lockdown in London in the coming days.
A statement from the bank commented that “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”.
The Bank also announced an increase on £200 billion to its holdings of UK government and corporate bonds with an effort to lower the cost of borrowing.
Mr Bailey has announced that today’s second emergency interest rate cut, which comes just over a week after the first occurred, has come as financial markets became “borderline disorderly”. A fear that coronavirus could lead to a rush into the US dollar, away from sterling and lending to the UK government.
The governor reiterated his unwillingness to cut the rates to zero or negative levels as it would greatly impact banks ability to lend. As such the latest cut now sets interest rates at the lowest they can feasibly go.
It will be interesting to monitor any further actions that may be necessary in the coming weeks.
