Barclays, meanwhile, said that the low interest rates would be passed onto consumers, promising a mortgage rate cut of 0.25 percent.
Advertisement
“The BOE’s asset purchase programme will take six months to complete and the corporate bond purchase programme is meant to be completed over an 18-month period”.
The Bank of England has cut benchmark interest rates to a new record low of 0.25 percent. The bank also published fresh forecasts for inflation and economic growth.
The Bank kept its growth forecast at 2% for 2016, thanks only to a better than expected first half, but it sharply reduced the outlook to 0.8% in 2017 and 1.8% in 2018. That hit for sterling came after the BoE cut interest rates to a record-low 0.25 percent, pledged 60 billion pounds ($78.71 billion) in government bond purchases and launched schemes to buy high-grade corporate bonds and ensure banks pass on the full rate cut to borrowers.
The Bank of England has cut interest rates for the first time since 2009.
The Bank of England on Thursday slashed interest rates to a record low 0.25 percent and announced a vast stimulus package to combat economic fallout from Britain’s looming European Union exit.
The pound slid by at least one percent against all major currencies and lost 1.4 percent against the USA dollar. Packaging company WestRock rose $1.28, or 3.1 percent, to $43.23 and glass container maker Owens-Illinois gained 32 cents, or 1.7 percent, to $18.92. The current rate of 0.25 will be the lowest interest rate in the central bank’s 322-year history. The introduction of the Term Funding Scheme was unanimous, while the corporate-bond buying plan was passed with a margin of 8 to 1, with Forbes voting against it, minutes from the meeting showed.
Ben Brettell, the senior economist at Hargreaves Lansdown said that central bank had little choice but to do something.
The UK is set to avoid recession thanks to economy-boosting measures, but will see “little growth” over the rest of 2016 and a sharp slowdown for the next two years, the Bank of England warned.
“A recession – at least a couple of quarters of negative growth – will be hard to avoid and unemployment is likely to rise from current levels”.
The pan-European STOXX index, which includes British companies, extended gains and was last up 0.8 percent, led higher by banks.
Business organisations the CBI and the British Chambers of Commerce both called on the government to do its bit to help.
Treasury chief Chancellor Philip Hammond hinted that was possible, saying in a letter to Carney on Thursday that he was “prepared to take any necessary steps to support the economy and promote confidence”.
Hammond responded that over the coming months the data from the real economy would be reviewed to see whether a fiscal response is needed in his Spending Review and Autumn Statement later this year.
Michael Hewson at CMC Markets said the British central bank may have overreacted to the Brexit shock, possibly without making much difference to the economic outlook.
Advertisement
“The revision in expectations for monetary policy in the U.S., Japan, the euro zone and the United Kingdom has played a big role in the rise in the gold price so far this year, and we expect it to continue”, Capital Economics analyst Simona Gambarini said.
