BoE cuts its key interest rate to historic low
The Bank of England has cut its main interest rate to its lowest point ever in an effort which is meant to cushion the British economy against the impacts of the country’s vote last month to leave the European Union.
The BoE has announced that it has reduced its benchmark interest rate to as low as 0.25 percent – the lowest level in its history of 322 years. The rate had been at 0.5 percent since March 2009, the media reported on Thursday.
The Bank has also announced measures to bolster Britain’s economy to address concerns that the country’s decision to leave the European Union could weigh on growth in the coming months.
Two key measures include one to buy £10 billion of high-grade corporate bonds and another - potentially worth up to £100 billion - to ensure banks keep lending even after the cut in interest rates.
A further injection of £60 billion in electronic cash into the economy has also been devised – a measure which is meant to buy government bonds, extending the existing quantitative easing (QE) program to £435bn in total.
These are parts of a four-point plan to mitigate the impact of leaving the EU.
The BoE has also added that it expects little growth in the second half of this year and that economic growth would decline sharply next year compared with its earlier forecast for 2017.
In 2017, the Bank said, there will be a sharp downgrade to growth of just 0.8 percent from a previous estimate of 2.3 percent. This will be the biggest downgrade in growth from one Inflation Report to the next, exceeding what was seen in the financial crisis, Reuters reported. The growth outlook for 2018 was cut to 1.8 percent.
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