Skip to main content

The Bank of England cut interest rates to 0.1 per cent on Thursday, its second emergency rate cut in slightly more than a week, and ramped up its bond-buying program in a fresh attempt to shield Britain’s economy from the coronavirus outbreak.

The BoE’s Monetary Policy Committee voted unanimously for the cut to the benchmark rate – which had been slashed to 0.25 per cent on March 11 – and for a £200-billion ($335-billion) increase in the central bank’s bond-buying program to £645-billion.

“Over recent days, and in common with a number of other advanced-economy bond markets, conditions in the U.K. gilt market have deteriorated as investors have sought shorter-dated instruments that are closer substitutes for highly liquid central bank reserves,” the BoE said. “As a consequence, U.K. and global financial conditions have tightened.”

Most of the extra debt the BoE will buy will be British government bonds, the bank said as it followed other central banks around the world in increasing stimulus efforts.

The pound, which on Wednesday sank to a 35-year-low as investors rushed into U.S.-dollar assets, rallied half a per cent to the day’s highs after the BoE’s announcement. Yields on British government bonds fell sharply, reversing some of a steep rise that began on Wednesday.

The purchases announced on Thursday would be completed as soon as “operationally possible, consistent with improved market functioning,” the BoE said. “The Bank will issue further guidance to the market in due course.”