[Asia Economy Reporter Jeong Hyunjin] The Bank of England (BOE) further cut its benchmark interest rate on the 19th (local time) to mitigate the economic shock caused by the spread of the novel coronavirus disease (COVID-19).
On the same day, the BOE held an emergency Monetary Policy Committee special meeting and announced that it would lower the benchmark interest rate by 0.15 percentage points from the existing 0.25% to 0.1%. The BOE explained the reason for the rate cut, stating, "The spread of COVID-19 and the measures to contain it will have a significant impact on the economy," adding, "This should be temporary."
The 0.1% rate is the lowest level in the history of the UK's benchmark interest rate. The BOE had previously made a surprise cut of 0.5 percentage points from 0.75% to 0.25% on the 11th. This rate cut is the first under the new Governor Andrew Bailey, who took office on the 16th.
Along with the rate cut, the BOE decided to increase its holdings of UK government bonds and corporate bonds by ?200 billion (approximately 294 trillion KRW). This measure aims to supply liquidity to the financial sector and reduce borrowing costs for companies. Foreign media reported that this effectively resumes the asset purchase program, known as quantitative easing (QE), which was implemented after the 2008 financial crisis.
The BOE plans to proceed with the Monetary Policy Committee meeting scheduled for the 26th as planned. If the two rate cuts and the expansion of bond holdings fail to produce significant effects in the market, additional measures are expected to be taken.
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