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Bank of England cuts interest rates

Pound and graph shutterstock_223021513 725 x 500

UK interest rates have been cut from 0.5% to 0.25% - a record low and the first cut since 2009.

The Bank of England announced a range of measures to stimulate the UK economy including buying £60bn of UK government bonds and £10bn of corporate bonds.

The Bank also announced the biggest cut to its growth forecasts since it started making them in 1983.

It has reduced its growth prediction for 2017 from the 2.3% it was expecting in May to 0.8%.

The decision to cut interest rates to 0.25% was approved unanimously by the nine members of the Monetary Policy Committee (MPC) and is the first change in interest rates since March 2009.

The £60bn increase in quantitative easing to £435bn was approved by a vote of 6-3, with Kristin Forbes, Ian McCafferty and Martin Weale preferring to wait until more concrete data is available rather than relying on surveys.

The corporate bond buying scheme was opposed by one member: Kristin Forbes.

Pound falls

As part of the package of measures designed to boost the economy following the UK's vote to leave the EU in June, the Bank is also introducing a new Term Funding Scheme.

This will lend directly to banks at rates close to the new 0.25% base rate to encourage them to pass on the lower interest rates to businesses and households.

Source : BBC News
www.bbc.co.uk

04 August 2016

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