This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2020/mar/11/financial-markets-coronavirus-fears-bank-of-england-slashes-interest-rates-business-live

The article has changed 27 times. There is an RSS feed of changes available.

Version 7 Version 8
Bank of England slashes interest rates; UK economy is stagnating – business live Bank of England slashes interest rates; UK economy is stagnating – business live
(32 minutes later)
The escalating coronavirus crisis has forced the first emergency UK interest rate cut since 2008The escalating coronavirus crisis has forced the first emergency UK interest rate cut since 2008
Right, I’m off to give Andy Sparrow a hand covering the UK budget.
It should include a raft of measures to protect the UK economy from the coronavirus threat, plus a big increase in infrastructure spending - and new growth and borrowing forecasts.
Here’s the Budget liveblog:
Jasper Jolly has the controls....
The early rally in Europe’s stock markets is fizzling out, again, as traders brace for another bumpy session on Wall Street.
The FTSE 100 is now up just 12 points, or 0.2%, at 5970 -- close to a four-year low. Italy’s FTME MIB has dipped into the red, while the Stoxx 6o0 is only up 0.5%.
Stocks are expected to fall on New York - having rallied last night on hopes of a stimulus package.
Investors are disappointed that president Trump hasn’t delivered any details of the measures he mentioned yesterday to protect the economy, such as a payroll tax cut.
Goldman Sach’s warning that the bull market is on borrowed time isn’t helping the mood either.
The Dow is being called 800 points down, a loss of almost 3%, having jumped by 1,167 points (nearly 5%) yesterday.
Goldman Sachs has predicted that Wall Street’s 11-year old bull market will soon end.Goldman Sachs has predicted that Wall Street’s 11-year old bull market will soon end.
In a research note, the investment bank has predicted that S&P 500 index will have fallen by 15% by the summer.In a research note, the investment bank has predicted that S&P 500 index will have fallen by 15% by the summer.
Its new mid-year target for the S&P 500 is 2450 points - compared to 2,882 points last night (and 3,386 back in February!).Its new mid-year target for the S&P 500 is 2450 points - compared to 2,882 points last night (and 3,386 back in February!).
Italy’s prime minister has tweeted that his cabinet have approved plans for a €25bn package of “extraordinary” measures.Italy’s prime minister has tweeted that his cabinet have approved plans for a €25bn package of “extraordinary” measures.
Giuseppe Conte also pledged that “We are doing everything that is necessary, with every tool available. Together we’re going to make it”.Giuseppe Conte also pledged that “We are doing everything that is necessary, with every tool available. Together we’re going to make it”.
But is €25bn enough? Italy’s death toll is rising alarmingly each day (from 461 to 631 yesterday), and its streets are deserted as citizens are locked down. A deep recession and a tragic social cost seems inevitable.But is €25bn enough? Italy’s death toll is rising alarmingly each day (from 461 to 631 yesterday), and its streets are deserted as citizens are locked down. A deep recession and a tragic social cost seems inevitable.
Here’s a video clip of the key points from Mark Carney’s press conference:Here’s a video clip of the key points from Mark Carney’s press conference:
Over in Westminster, chancellor Rishi Sunak has told the cabinet that Britain has “one of the best placed economies” to survive the Covid-19 crisis.Over in Westminster, chancellor Rishi Sunak has told the cabinet that Britain has “one of the best placed economies” to survive the Covid-19 crisis.
Sunak also confirmed that the Budget, due at 12.30pm, will include an economic action plan to combat the damage caused by the outbreak.Sunak also confirmed that the Budget, due at 12.30pm, will include an economic action plan to combat the damage caused by the outbreak.
A spokesman for Number 10 Downing Street said:A spokesman for Number 10 Downing Street said:
Our Politics Live blog (where we’ll cover the Budget later) has the details:Our Politics Live blog (where we’ll cover the Budget later) has the details:
UK bank HSBC has announced a package of support for customers as they tackle the financial impact of Covid-19.UK bank HSBC has announced a package of support for customers as they tackle the financial impact of Covid-19.
For personal bank customers, it could let them defer mortgage payments, and/or switch to an interest-only mortgage. It is also waiving charges on its fixed-rate saving account, to let customers access cash if needed. HSBC is also offering to temporarily increase credit card and overdraft limits.For personal bank customers, it could let them defer mortgage payments, and/or switch to an interest-only mortgage. It is also waiving charges on its fixed-rate saving account, to let customers access cash if needed. HSBC is also offering to temporarily increase credit card and overdraft limits.
For business customers, the Bank has “allocated £5bn to help businesses that need support” (from its existing SME lending scheme), and could also give repayments holidays or review loans. That could free up cash, to help companies whose sales take a big hit this year.For business customers, the Bank has “allocated £5bn to help businesses that need support” (from its existing SME lending scheme), and could also give repayments holidays or review loans. That could free up cash, to help companies whose sales take a big hit this year.
The Italian government has hiked its coronavirus stimulus package to €25bn, as it tries to protect its economy from the most restrictive measures since World War Two.The Italian government has hiked its coronavirus stimulus package to €25bn, as it tries to protect its economy from the most restrictive measures since World War Two.
The AFP newswire has the story:The AFP newswire has the story:
Here’s a video clip of BoE governor Mark Carney pledging that the UK financial system is strong enough to help Britain cope with the coronavirus:Here’s a video clip of BoE governor Mark Carney pledging that the UK financial system is strong enough to help Britain cope with the coronavirus:
And here’s more reaction, first from Allianz’s chief economic advisor Mohamed El-Erian:And here’s more reaction, first from Allianz’s chief economic advisor Mohamed El-Erian:
Here’s Sky’s Ed Conway:Here’s Sky’s Ed Conway:
Plus Julianna Tatelbaum of CNBC:Plus Julianna Tatelbaum of CNBC:
City economists are very concerned that the UK economy stagnated in the last quarter.City economists are very concerned that the UK economy stagnated in the last quarter.
Howard Archer of EY Item Club says this morning’s data are “very disappointing” -- showing Britain’s economy was weak before the Covid-19 outbreak began.Howard Archer of EY Item Club says this morning’s data are “very disappointing” -- showing Britain’s economy was weak before the Covid-19 outbreak began.
Sam Tombs of Pantheon Economics says the UK economy is weak enough to justify an interest rate cut anyway!Sam Tombs of Pantheon Economics says the UK economy is weak enough to justify an interest rate cut anyway!
Martin Lewis, founder of MoneySavingExpert.com, has described the Bank of England’s move as “extraordinary, unprecedented economic shock therapy”.
Such as dramatic rate cut shows there are “seismic coronavirus tremors running through the nation’s finances”, so the Bank is trying to encourage spending and keep money flowing through the system.
Lewis adds:
Back at the Bank of England, Mark Carney is insisting that the coronavirus crisis needn’t create a new financial crisis.
Q: Do we need co-ordinated action by the world’s governments, asks my colleague Richard Partington?
Carney replies that he was involved in the joint interest rate cuts of 2008 (when he was Bank of Canada governor).
Those measures were needed to “get to the weekend”, so G7 leaders could decide what steps to take, Carney says.
Q: Won’t savers suffer from today’s rate cut, asks the Daily Mail...
Carney replies that Daily Mail readers will understand that people’s lives, jobs, businesses need to be protected during the coronavirus crisis.
Q: But what if the economic shock of coronavirus isn’t temporary, as you believe?
Carney insists there is no reason for the economic damage to be as bad as 2008.
His successor, Andrew Bailey, also warns commercial banks that the BoE expects this morning’s measures to be passed on. Customers deserve to be treated fairly, he says, and we’re watching....n
Today’s GDP report shows clearly that Britain’s manufacturers have been struggling for months:
Britain’s economy was dragged back by a decline in its car sector in the last quarter.
The ONS says:
NEWSFLASH: Britain’s economy failed to grow in the last few months, showing it was weak even before the coronavirus struck.
GDP was flat in January, according to new data from the Office for National Statistics.
It was also flat in the November-January quarter - weaker than expected, and dashing hopes that the economy enjoyed a bounce after December’s general election.
The ONS says that Britain’s dominant services sector was flat in the three months to January 2020, while production contracted by 1.0%. Construction (a small part of the economy) grew by 1.4%.
Q: Do you agree with Christine Lagarde’s warning that Europe faces a repeat of the 2008 crisis?
Mark Carney replies that this is a different crisis -- reiterating that the banking sector is much stronger than a decade ago.
There is no reason for this shock to turn into the experience of 2008, which created a “virtual lost decade” in some countries -- if policymakers handle it well, he says.
Carney also points out that coronavirus is fundamentally a health crisis, pointing to the “extraordinary efforts” of NHS health professionals, carers, and volunteers across the country.
The next governor, Andrew Bailey, wades in too -- saying the Bank has spent a decade bolstering the financial sector to cope with such an economic shock (although they weren’t expecting this particular one).
Q: If interest rates can be lower -- why didn’t you cut them there today, rather than only cutting to 0.25%?
Mark Carney repeats that today’s measures are a “big package” -- again citing the cut to the Countercyclical Capital Buffer which releases £190 billion of bank lending to businesses.
And he again hints at the Budget will include significant measures -- you’ll have to wait until the end of the day, or at least midday, for the full package.
Q: Could the UK fall into a recession this year, and what happens if the coronavirus is not temporary?
Mark Carney insists that the shock of Covid-19 will pass with time, as medical treatments are devised.
It’s too early to talk about a recession, he insists -- although the direction of the impact on the UK economy is clear.
Q: Might the Bank act again at its scheduled meeting later this month, and could you expand your QE (bond-buying) programme?
Mark Carney replies that quantitative easing is very much part of the Bank’s toolkit. Asset purchases could provide useful firepower if needed.
But today’s moves are a ‘big package’, he insists.
Reducing Britain’s ‘counter-cyclical buffer’ (meaning banks are allowed to hold less capital) will release a “huge amount” of extra lending.
Onto questions
Q: Are UK interest rates now as low as they can go?
No, Mark Carney replies. There is room for interest rates to be cut further, to just above zero.
Q: What evidence is there that Covid-19 is creating an economic shock in the UK?
Carney says there are some early signs -- China’s growth swinging from 5.5% growth to a likely contraction.
He also cites very early signs in the global PMI reports (surveys of purchasing managers).