BANK OF ENGLAND CUTS BANK RATE TO 0.25% AND EXPANDS QE BY £60 BILLION

So the Bank of England, as widely expected, has today cut the Bank Rate to 0.25%. Having signalled a rate cut last month but subsequently having taken no action, the MPC has backed itself into a bit of corner this time around. The Bank’s decision to take such action is in response to Brexit but given that leaving the EU was a political decision, there is only so much that monetary policy can do in such a circumstance. How the Bank reacts to this question will be very interesting indeed.

It is not clear what the impact of a quarter per cent cut in the Bank Rate will have on the economy or indeed for households. Mortgage rates are already at record lows and it is unlikely that a further small cut in rates will encourage further borrowing, rather it is the availability of funding that is the key here.

The impact of the expansion of Quantitative Easing by £60 billion is also uncertain and that is reflected in the MPC’s voting pattern. The announcement of the purchase of corporate bonds was somewhat unexpected and the MPC conference later today will be very closely scrutinised by the market

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