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Bank of England slashes interest rates to protect UK from coronavirus shock - business live Bank of England slashes interest rates to protect UK from coronavirus shock - business live
(32 minutes later)
UK central bank has cut Bank Rate to just 0.25%, to respond to the economic shock from Covid-19UK central bank has cut Bank Rate to just 0.25%, to respond to the economic shock from Covid-19
Today’s shock rate cut is the first unscheduled Bank of England move since the financial crisis, and the biggest as well:
Stocks are rallying in London at the start of trading, following the Bank’s emergency rate cut.
The FTSE 100 has rallied by almost 2%, gaining 116 points to 6074.
UK housebuilders are leading the rally, along with holiday firm TUI, and banks including Barclays.
But a word of caution: the FTSE 100 surged by over 200 points early on Tuesday, before subsiding amid coronavirus fears. On Monday it plunged over 500 points.
The British Chambers of Commerce has cheered the BoE’s move -- but cautioned that commercial banks need to pass these measures onto small firms.
BCC Director General Dr Adam Marshall says:
The pound initially plunged when the Bank’s rate cut was announced -- but has now clawed its way back to $1.29
Reaction to this morning’s emergency cut to UK interest rates to just 0.25% is pouring in.Reaction to this morning’s emergency cut to UK interest rates to just 0.25% is pouring in.
Karen Ward, chief market strategist at J.P. Morgan Asset Management, says the Bank’s moves should help the economy -- but government spending would help more:Karen Ward, chief market strategist at J.P. Morgan Asset Management, says the Bank’s moves should help the economy -- but government spending would help more:
This chart shows how UK interest rates have been cut back to record lows this morning:This chart shows how UK interest rates have been cut back to record lows this morning:
Here’s our news story on the Bank of England’s emergency move today:Here’s our news story on the Bank of England’s emergency move today:
This is the full treatment from the Bank of England and significant for three reasons: the timing, the scale and the details, says our economics editor Larry Elliott:This is the full treatment from the Bank of England and significant for three reasons: the timing, the scale and the details, says our economics editor Larry Elliott:
He explains:He explains:
UK interest rates are now at their lowest ever level again. They’ve only been 0.25% once before -- after the Brexit vote in 2016.UK interest rates are now at their lowest ever level again. They’ve only been 0.25% once before -- after the Brexit vote in 2016.
In an attempt to protect small UK companies, the Bank of England is creating a new “Term Funding Scheme”.In an attempt to protect small UK companies, the Bank of England is creating a new “Term Funding Scheme”.
This will provide a “cost-effective source of funding” for small firms, says the BoE. It’s effectively helps commercial banks to lower the interest rates on their loans. It could pump up to £100bn of extra potential borrowing into the system. This will provide a “cost-effective source of funding” for small firms, says the BoE.
It effectively helps commercial banks to lower the interest rates on their loans, by borrowing cheaply from the Bank (‘at or very close to base rate’). It could pump up to £100bn of extra potential borrowing into the system.
The Bank says:The Bank says:
Today’s measures are meant to help UK businesses and households through the “sharp, large and temporary” impact of the coronavirus crisis, says the Bank of England:Today’s measures are meant to help UK businesses and households through the “sharp, large and temporary” impact of the coronavirus crisis, says the Bank of England:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Big breaking news this morning! The Bank of England has slashed UK interest rates in an attempt to protect the British economy from the impact of the coronavirus.Big breaking news this morning! The Bank of England has slashed UK interest rates in an attempt to protect the British economy from the impact of the coronavirus.
In an unscheduled move, the BoE is cutting interest rates to just 0.25%, from 0.75%. That’s a significant move, intended to protect firms and households from financial distress.In an unscheduled move, the BoE is cutting interest rates to just 0.25%, from 0.75%. That’s a significant move, intended to protect firms and households from financial distress.
The Bank says:The Bank says:
The Bank is also launching a new funding scheme to provide funding for businesses struggling with the economic shock of Covid-19.The Bank is also launching a new funding scheme to provide funding for businesses struggling with the economic shock of Covid-19.
Thirdly, the Bank is also reducing the amount of capital that UK banks need to hold -- a move that will create £190bn of extra bank lending to businesses.Thirdly, the Bank is also reducing the amount of capital that UK banks need to hold -- a move that will create £190bn of extra bank lending to businesses.
It’s a major intervention on governor Mark Carney’s final week at the Bank, as global policymakers try to get to grips with a crisis that threatens to push the world economy into recession.It’s a major intervention on governor Mark Carney’s final week at the Bank, as global policymakers try to get to grips with a crisis that threatens to push the world economy into recession.
The agendaThe agenda
9.30am: UK GDP figures for November-January9.30am: UK GDP figures for November-January
12.30pm: UK budget12.30pm: UK budget
More to followMore to follow