The Bank of England announces an emergency rate cut to tackle the economic impact of Coronavirus

With the rising impact of Coronavirus on the global economy, the Bank of England (BoE) decided in favor of an emergency rate cut on Wednesday morning to add the fiscal stimulus required for economic growth in the United Kingdom.

The U.S Federal Reserve had also opted for the first emergency rate cut in over a decade earlier this month. The virus that originated in Wuhan, China has so far infected around 1,19,000 people worldwide and caused over 4,000 deaths. Economies from all over the world are reporting panic buying, flight cancelations, and strict quarantine measures to fight the health emergency.

BoE Cuts Bank Rate By 50 Basis Points To 0.25%

In its statement on Wednesday, the Bank of England declared a 50 basis points cut on its bank rate to 0.25%. The Monetary Policy Committee (MPC) held a meeting on March 10^th in which the members voted unanimously in favor of the rate cut.

The BoE also highlighted in its statement this morning that indicators of uncertainty in the financial markets have touched extreme levels. The central bank said it plans on launching new scheme of term-funding that will offer support to SME (small and medium-sized enterprises). Novel measures directed at helping commercial banks expand lending were also in the offing. According to the BoE:

“Following the spread of Covid-19, risky asset and commodity prices have fallen sharply, and government bond yields reached all-time lows, consistent with a marked deterioration in risk appetite and in the outlooks for global and U.K. growth.”

So far, the UK has reported 382 people as Coronavirus positive including the current health minister, Nadine Dorries.  

UK’s Finance Minister To Release Annual Budget On Wednesdsay

The UK’s economy was seen weakened towards the end of last year. BoE’s decision of monetary policy leniency came only hours before Chancellor of the Exchequer, Rishi Sunak, reveals the annual budget plans. As per the sources, the annual budget release is expected to focus largely on measures directed at tackling the Coronavirus epidemic.

The central bank’s emergency decision stirred volatility in the forex market with the GBP/USD currency pair first losing strength to rally down to 1.2827. It was, however, followed almost immediately with a massive upward rally over 100 pips. The currency pair is currently exchanging hands at 1.2940. The next move in Cable (GBP/USD) is expected later today following the release of annual budget and the monthly report on economic growth.