The Bank of England (BoE) unexpectedly cut the key interest rate by 50bps to 0.25% during an emergency meeting on March 11th. The central bank said the rate cut will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.
Although the timing of the decision was a surprise, markets were already pricing in a 25bps cut on March 26th. The central bank also announced a raft of other measures to bolster Britain’s economy against disruption caused by the coronavirus outbreak, including a new funding scheme with additional incentives for small and medium-sized enterprises financed by the issuance of central bank reserves and more funding for banks that increase lending, specially to SMEs. Policymakers also decided to maintain the stock of corporate bond purchases at £10 billion and the stock of UK government bond purchases at £435 billion.