The Bank of England made the second emergency rate cut in just over a week, slashing interest rates to a record low of 0.1%, and ramped up bond-buying to shield the economy from the impact of coronavirus
LONDON - The Bank of England promised 200 billion pounds of bond purchases and cut its key interest rate to 0.1% in a second emergency move in just over a week to try to mitigate the hit to Britain’s economy from the coronavirus outbreak.
The 200 billion pound increase, at 9% of British GDP, was even bigger than the ECB’s which was equivalent to 6% of the euro zone’s economic output, and took the BoE’s total asset purchase plan to 645 billion pounds. The BoE said it would “keep under review the case for participating in the primary market”, suggesting it could eventually buy bonds from the government or companies directly rather than on secondary markets as it does now.
“I just want to emphasise that we are not abandoning the, I think, very clear central bank philosophy in terms of monetary financing, because history tells us where that leads.” Bailey said rumours about a lockdown in London exacerbated Wednesday’s chaos in British markets and he reiterated his opposition to closing trading.
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