Tom Goodenough Tom Goodenough

‘Stimulus now’: Bank of England cuts interest rate down to 0.25pc

As expected, the Bank of England has cut base interest rates down to 0.25 per cent- the first movement since rates were cut to an ’emergency’ low of 0.5 per cent in March 2009. There’s a “clear case for stimulus, and stimulus now” said Mark Carney, BoE governor – so the money printing machine is being put back into action. About £60 billion is to be created electronically, and used to lend money to the government via gilt purchases. It will save Theresa May’s government a fortune: the rate of interest charged on the many loans it takes (ie, gilt yields) collapsed to 0.63pc today; almost half the rate they were a month ago. The bank’s prediction now is that Britain will avoid recession after the Brexit vote (contrary to what George Osborne was suggesting) but with growth halved to 0.8 per cent in 2017 but getting back to where it would othwise have been in 2019. Philip Hammond, the Chancellor, welcomed the move.

‘The vote to leave the EU has created a period of uncertainty, which will be followed by a period of adjustment as the shape of our new relationship with the EU becomes clear and the economy responds to that. It’s right that monetary policy is used to support the economy through this period of adjustment. That’s why I have authorised the Governor’s request for an increase in asset purchases and a new lending scheme to support the economy, helping ensure that the benefit of low interest rates is passed on by the banks to households and businesses. As recent figures on jobs and growth have shown, we enter this period of adjustment from a position of economic strength.’

Carney said the Brexit vote had sparked a ‘regime change’ – but he sounded more optimistic than he allowed himself to during the referendum campaign.

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