Bank of England cuts base rate to lowest ever 0.1%
At a special Monetary Policy Committee (MPC) meeting held today, the members voted unanimously to reduce the Bank Rate by 15 basis points to 0.1%. This is the lowest ever level in the history of the Bank.
This comes just over a week after the Bank cut rates from 0.75% in an attempt to support the economy in the wake of the coronavirus crisis.
The MPC also voted unanimously to restart its programme of Quantitative Easting (QE) by increasing the Bank of England’s holdings of UK government bonds and sterling non-financial investment-grade corporate bonds by £200bn to a total of £645bn.
This will be financed by the issuance of central bank reserves.
The Committee also voted unanimously that the Bank of England should enlarge the Term Funding Scheme which encourages banks to lend to businesses.
With more cheap money from the government, this means banks won’t need to offer attractive rates to gain or retain customers. Just last week £100bn was announced for the scheme.
A statement read: “In light of actions to tackle the spread of the virus, and evidence relating to the global and domestic economy and financial markets, the MPC held an additional special meeting on 19 March.
“Over recent days, and in common with a number of other advanced economy bond markets, conditions in the UK gilt market have deteriorated as investors have sought shorter-dated instruments that are closer substitutes for highly liquid central bank reserves. As a consequence, UK and global financial conditions have tightened.”
The next MPC meeting will take place on 25 March with minutes to be published on 26 March.