UK interest rates hit new low
5 August, 2016
As markets anticipated the Bank of England “wielded a sledge hammer” in an attempt to help cushion the blow to the UK economy as a result is the recent move to Brexit.
The Bank of England dropped UK interest rates from the first time in 7 years, leaving them at a record 0.25 percent whilst also pledging an additional £60 billion to buy up new government bonds over the next 6 months plus introduced two additional schemes. The first of which is to set aside £10 billion to buy high grade corporate debt and the other, which could be valued as high as £100 billion, is to ensure banks pass the full cut on to borrowers.
The pound too a big hit as although a cut was expected, the voting split was unanimous and the QE wasn’t fully expected to coincide with the rate cut, which some expected might happen later this year. Acting sooner rather later gave a clear message the Bank were acting to help boost the economy having already downgraded the growth expectations for 2017.
The results of the hefty stimulus action on the currency markets was a 1.6 percent drop against the US dollar and a 1.75 percent drop against the single currency Euro as well as similar drops in value against most major currencies ( over 3 cent against the Aussie dollar and nearly 4 cents against the Canadian and Kiwi dollars).
The bank will now look at the coming months ecostats and decide whether this was enough or whether more stimulus is required, with some early reports from banks eyeing the chance of further action before the end of the year in October or November.
Today the morning is pretty quiet for stats as we await the all important US employment figures, especially the non-farm payrolls and unemployment rate after lunch. Canadian PMI and US consumer credit finish off the week.
Big day yesterday with big movements seen and likely the fallout could carry on in today’s trade so if you still have your currency to purchase contact one of the team as early as possible to discuss the options available today.
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