The Bank of England has become the latest central bank to cut interest rates.
In its first emergency move since the 2008 financial crisis, the Bank of England announced that it is cutting its main interest rate by 50 basis points to 0.25%, returning the benchmark rate to a record low.
The British central bank also announced a new program to provide easy and cheap credit. They reduced the amount of money capital banks must hold in a further attempt to support lending.
U.K. stocks rose after the decision, which arrived a week after the U.S. Federal Reserve and Bank of Canada cut rates by the same amount and just hours before the British government will announce spending measures in its latest budget.
The European Central Bank is expected to join the growing wave of easing later this week after President Christine Lagarde warned leaders on Tuesday that the coronavirus crisis has echoes of 2008.
Bank of England Governor Mark Carney said that the central bank package is intended to achieve maximum impact, and stressed that the Bank of England is prepared to take further action if necessary.
These measures will help keep firms in business and people in jobs, and they will prevent a temporary economic disruption from causing long-term harm, Carney told reporters in London. This is a big package.
What may appeal to investors is that the Bank of England not only delivered a large rate cut like the Fed, but also targeted aid to businesses and banks who could feel fallout from a drop in demand because of the coronavirus. The U.K. response also stands out with the level of coordination between the central bank and the federal government -- a synchronization which may please markets and serve as a model for other economies.
