The Courier & Advertiser (Angus and Dundee)
UK interest rates cut in emergency move to shore up economy
FINANCE: Borrowing costs dip to record low levels amid virus fears
The Bank of England announced an emergency cut in interest rates to shore up the economy amid the coronavirus outbreak.
Policymakers reduced rates from 0.75% to 0.25%, taking borrowing costs back down to the lowest level in history.
The Bank said it would also free up billions of pounds of extra lending power to help banks support firms.
The cut will drive down the cost of borrowing for millions of households and businesses, giving them breathing space if the economy slows down.
The Bank said it must help UK businesses and households through an economic shock from the virus “that could prove sharp and large, but should be temporary”.
It is the first cut since August 2016 and the first unplanned rates decision since the 2008 financial crisis. It was further revealed interest rates could be cut again if necessary.
“The Bank of England’s role is to help UK businesses and households manage through an economic shock. MARK CARNEY, BANK OF ENGLAND GOVERNOR
The move came hours before the chancellor announced further measures to support growth and jobs in the Budget later.
Mark Carney, the outgoing governor of the Bank of England, said policymakers had seen a “sharp fall in trading conditions”, including spending on non-essential goods.
“The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large and sharp, but should be temporary,” he said.
Mr Carney stressed the economic damage caused by the coronavirus remained unclear. However, he suggested that the UK economy could shrink in the coming months.
He said early evidence from China suggested that the world’s second largest economy was on course to contract in the first quarter.
While the Bank’s last emergency rate cut was in October 2008, Mr Carney said the virus was unlikely to inflict the damage seen during the financial crisis.
“There is no reason for it to be as bad as 2008 if we act as we have, and if there is that targeted support,” he said. “There is room for interest rates to be cut further, to just above zero.”
The Bank will meet again, as scheduled, on March 26 and look at whether further action is needed then.