Bank of England Cuts Bank Rate, Boosts Bond Purchases
Posted on 03/19/2020
Due to the spread of the Wuhan coronavirus (COVID-19), in an emergency meeting the Bank of England, the bank cut its bank rate by 15 basis points to 0.1% and further increased its holdings of U.K. government bonds and sterling non-financial investment-grade corporate bonds by £200 billion to a total of £645 billion. The Monetary Policy Committee (MPC) also voted unanimously that the Bank of England should enlarge the TFSME scheme, financed by the issuance of central bank reserves.
On March 11, 2020, the Bank of England’s three policy committees announced a package of measures to support U.K. businesses and households through this period. In U.K. Prime Minister Boris Johnson’s budget on the same day, the Chancellor of the Exchequer announced a number of fiscal measures with the same aim. On March 17, 2020, this combined package of measures was complemented by the announcement by HM Treasury of the Covid 19 Corporate Financing Facility (CCFF), for which the Bank of England will act as HM Treasury’s agent. By purchasing commercial paper, the CCFF will provide funding to non-financial businesses making a material contribution to the UK economy to support them in paying salaries, rents and suppliers while experiencing the likely disruption to cashflows associated with the coronavirus.