BoE slashes base interest rate again to 0.1%

Written by Adam Cadle

19/03/2020

The Bank of England (BoE) has announced a further cut to the UK’s base interest rate from 0.25% to 0.1%.

The BoE’s Monetary Policy Committee (MPC) voted at a special meeting today to slash the rate by 15 basis points to 0.1%, as well as increase its holdings of UK government and corporate bonds by £200bn to a total of £645bn.

The cut is the first major decision made by Andrew Bailey who only took over from Mark Carney as Bank of England governor on Monday.

The move, which now brings interest rates to their lowest levels in history, comes eight days after the MPC had voted unanimously in favour of an emergency rate cut to 0.25%, down from 0.75%, to stabilise the economy amid the coronavirus outbreak.

The bank said the spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be “sharp and large”, but should be temporary.

Commenting on the £200bn increase in quantitative easing, Quilter Investors portfolio manager Hinesh Patel said it "shows the central banks are doing everything they can to prevent the credit markets seizing up, which in Europe is more important than in the US for a functioning economy".

“The program should help contain gilt yields and credit spreads, but in the short term volatility will remain a feature in the market as the number of confirmed coronavirus cases continues to climb. These bouts of volatility often present opportunities for investors with longer time horizons though.”

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