It was the first interest rate reduction since March 2009, when the bank cut to the previous historic low 0.50 percent – and launched the radical QE policy to stimulate lending and growth during the notorious global financial crisis.
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The BoE said it would take “whatever action is necessary” to achieve stability in the wake of Britain’s vote to leave the EU.
The Labor Department said applications for unemployment aid rose to 269,000 last week, a level close to historical lows and a positive sign for the job market.
The BoE’s quarter point rate cut to a record low 0.25 percent sent already low global bond yields even further down with British yields hitting record lows as gilt prices rose.
“Today’s interest rate cut was therefore widely anticipated, although the package of additional measures to support the economy is more significant in scope than what markets had priced in”.
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.
The pound dropped 1 percent to under $1.32 and the FTSE 100 stock index jumped almost 1 percent.
The Australian and New Zealand dollars, which have suffered in the past week from worries that central banks globally would not meet market expectations for further policy easing, rose around half a percent against the USA dollar. Carney insisted that subzero interest rates were not being considered.
“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 of England Governor Mark Carney told a news conference.
Wall Street shares were little changed as investors awaited Friday’s U.S. non-farm payrolls report for clues on the timing of the next Federal Reserve interest rate hike.
“Based on our analysis, the payroll growth in July is likely to be pretty strong”, said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.
Brent crude futures rose 1.0 percent on Thursday to $43.55 per barrel, extending its recovery from Monday’s four-month low of $41.41 while USA crude futures gained 1.2 percent to $41.33 per barrel.
The dollar index was steady at 95.752 after gaining 0.3 percent on Thursday.
Sterling crawled up 0.1 percent to $1.3120 after retreating 1.6 percent overnight.
The BoE’s easing measures hammered sterling, which fell 1.52 percent at $1.3120 GBP=D4 , its largest one-day drop against the dollar in a month.
The dollar gained 0.1 per cent to 101.27 yen, on track to fall 0.8 per cent on the week.
The price of gold rose $2.70 to $1,367.40 an ounce.
Spot gold was up 0.3 per cent at $US1,361.14 an ounce by 3:00 p.m. EDT (0500 AEST), off an earlier low of $US1,348.50, while USA gold futures for December delivery settled up 0.2 per cent at $US1,367.40. The New Zealand dollar, known as the kiwi, strengthened as much as 73.06 cents, compared with 71.78 cents late Wednesday in NY, before paring gains to trade virtually flat at 71.79 cents late Thursday in NY.
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Brent crude, a benchmark for worldwide oil prices, added 1.19 dollars (90p), or 2.8%, to 44.29 dollars (£33.79) a barrel in London. Callaway climbed 42 cents, or 4 percent, to $11.
