The Bank of England Cuts Rates by 50bps and Delivers GBP100bn in SME Loans
The Bank of England delivered an emergency rate cut this morning, slashing interest rates by 50bps to 0.25%.
Joining its G7 peers, which includes the Bank of Canada, the FED and the RBA, the rate cut was delivered out of the BoE’S monetary policy calendar.
In a bid to deliver support to the flagging UK economy and counter the impact of the coronavirus outbreak, the Bank of England also delivered a string of other measures.
The BoE’s move came ahead of the Chancellor and Boris Johnson’s first budget. The markets are anticipating that the budget will end years of austerity.
A funding scheme mirroring the 2016 fund that had plowed just shy of £130bn into the economy by way of cheap business loans was also introduced. The latest scheme delivers more than £100bn in funding to support small and medium-sized enterprises.
The Bank of England also cut capital buffers to support increased lending. The buffer was dropped to 0% and is to last for a minimum of 12-months.
For Bank of England Governor Carney, it was a decisive more, with the MPC voting unanimously in favor of the rate cut.
The numbers not only preceded the government’s first budget, but also key stats from the UK that supported the move.
In January, the economy stalled after having grown by 0.3% in December. Year-on-year, the economy grew by 0.6%, down from 1.2% in December.
Production figures were mixed, however. Manufacturing production increased by 0.2%, while industrial production fell by 0.1%.
Of less influence on the Pound were trade figures for January. The UK’s trade deficit widened from £1.42bn to £3.72bn. Economists had forecast a widening to £7.00bn.
The latest move had a muted impact on the Pound, with weaker economic data also doing little. The Pound had recovered from $1.28 levels from earlier in the session.
At the time of writing, the Pound was up 0.15% to $1.29213, with the Budget next in focus.