BOE Cuts Rates Again, Pledges to Restart Asset Purchases
As the coronavirus crisis continues to escalate in Britain and across the world, the Bank of England announced its second emergency rate cut, bringing interest rates down to 0.1% during the previous session. In addition, the central bank also stated that it will start bond purchases worth 200 billion pounds in a bid to support the British economy from coronavirus risks.
This will be the first round of asset purchases by the BOE in almost four years, as it restarts buying both government bonds as well as corporate debt. The BOE’s latest decision comes a day after the ECB pledged to undertake bigger asset purchases in an attempt to stave off recession in the Eurozone economy.
Panic in British financial markets has risen as GBP/USD weakened to multi-year lows as a result of panic selling in the markets, with investors dumping other assets as they rushed towards the safety of the US dollar. Stock markets also remain under pressure over the high risk-off sentiment, which has driven sell-offs amid increased volatility.
Despite announcing a slew of stimulus measures, markets remain concerned that the response by the government and central bank may not suffice to protect the British economy from falling into recession. Amid high levels of uncertainty surrounding Brexit, the coronavirus pandemic has increased worries about rising unemployment and possible bankruptcies among businesses and households in the country.
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