Shares and sterling rally after rate cut

sHArEs edged higher yesterday and sterling swung wildly after the Bank of England slashed interest rates to a record low of 0.1pc.

in another topsy-turvy day on the markets, the Bank cut rates for the second time in just over a week and restarted the moneyprinting presses.

Last week, just before the Government revealed its Budget, the Bank cut rates from 0.75pc to 0.25pc, which came just days before mark Carney departed as governor.

Yesterday, in the first week of his new job, new governor Andrew Bailey (pictured) announced it was going a step further and would knock rates down to 0.1pc.

The central bank will also ramp up its bond-buying activity, pumping an extra £200bn into the economy in response to the chaos which coronavirus has caused in financial markets.

The fTsE 100 has tumbled 30pc since virus fears gripped traders on february 24, and earlier this week the pound sank to its lowest level against the dollar since 1985.

Bailey said: ‘We’ve seen very sharp moves in financial markets in the past few days, the pace of which, frankly, was increasing very rapidly. And we were moving into conditions that were, if not disorderly, frankly bordering on disorderly.’

The fTsE100 ended the day up 1.4pc at 5151.61 points. The pound, which crashed to a a 35-year low below $1.15 this week, rose back towards $1.18 before giving up its gains. it rose as high as €1.0960 against the euro having earlier been trading at €1.0529.

But both share indices and sterling are far below the level seen prior to the coronavirus crisis.

The Bank of England’s move to lower interest rates follows in the footsteps of a number of its peers.

The European Central Bank announced a £700bn bond-buying package yesterday to ease coronavirus pressures – though the relative strength of the pound against the euro last night suggested the Bank of England’s measures went down better with traders. The Us federal reserve has cut rates to zero, announced it was pumping more than $1.5trillion into the economy through short-term loans, and President Trump is even considering handing cheques to citizens. And the Bank of Japan has committed to buy around £1.5bn worth of government bonds and inject more cash into the economy. Bailey said he was ‘not keen’ on using negative interest rates to boost the economy, but it would be ‘foolish’ to take any options off the table.