The Monetary Policy Committee at a special meeting on 19 March voted to cut the Bank rate to 0.1% and increase its holdings of UK government and corporate bonds by £200 billion. The total level of QE is now £645 billion.
Andrew Bailey, Governor of the Bank of England, has announced the decision after only three days in the job. His predecessor Mark Carney slashed the interest rate from 0.75% to 0.25% earlier this month in the response to the coronavirus crisis.
The British government has been following its peers in the continent with measures of social distancing, including limiting transport in London and closing schools. Chancellor of the Exchequer Rishi Sunak recently announced massive fiscal stimulus plans. Funding from the BOE will help raise money for the vast spending.
Here is a quote from the statement:
Over recent days, and in common with a number of other advanced economy bond markets, conditions in the UK gilt market have deteriorated as investors have sought shorter-dated instruments that are closer substitutes for highly liquid central bank reserves. As a consequence, UK and global financial conditions have tightened.
GBP/USD is trading around 1.1660, holding onto its recovery after collapsing on Wednesday by some 700 pip that sent it to the lowest levels since 1985. Cable traded at 1.32 only on March 9.
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