The Monetary Policy Committee launched the Term Funding Scheme to make sure that the lower levels of interest rates now set by the Bank of England are reflected in the costs commercial banks charge households and companies to borrow funds.
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Many market players also believe the BoE may resume its multi-billion-pound quantitative easing program of government bond purchases. MSCI’s world stocks index rose 0.3 percent.
The pan-European STOXX600 index was up 0.5 percent.
“(Markets) are infatuated with QE.
Other share markets also rose and, before the 1230 GMT non-farm payrolls numbers that a Reuters poll predicted would show the world’s biggest economy added 180,000 jobs last month, USA futures pointed to a slightly firmer opening on Wall Street.
Mark Bailey, managing director of house builder Barrett Homes, who is based in Sevenoaks, said: “This is a positive move from the Bank of England and means more good news for homeowners, particularly those on tracker mortgages”. He said, unequivocally, “No, on the negative interest rates conversation, I don’t see a scenario for that”.
The boost in risk appetite flowed through to the commodity markets and allowed oil to gain strongly on the day, as the September crude contract rose $1.10 at US$41.93 per barrel.
But Japan’s Nikkei surrendered its earlier gains to close flat.
London’s measures came after a string of disappointing announcements out of global central banks from Tokyo to Europe that came up well short of expectations and dented confidence.
“By acting early and comprehensively, the (Bank) can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the United Kingdom economy”, Bank Governor Mark Carney told a news conference.
Britain’s Royal Bank of Scotland reported widening first-half losses, sending its shares down 4.5 percent.
Stock futures indicated a firmer opening for Wall Street, with so-called e-minis for the Dow Jones, S&P500 and Nasdaq up around a quarter percent each.
Economist Andrew Sentance has said this is one case where a central bank can do little to offset the shock to the economy. It predicted that the sharp post-Brexit fall in the pound and the stimulus package would drive annual inflation back to the BOE’s 2% target by next year.
The pound also eased to a three-week low against the euro, which rose to as high as 84.97 pence on Thursday and last stood at 84.80.
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Eligible institutions will be able to borrow four-year central bank reserves for an initial period of 18 months at rates close to the Bank Rate. Money markets are priced just a 30 percent chance of another rise by year-end, according to CME’s FedWatch tool.
