The Bank of England will cut interest rates to the lowest in its 322-year history.
After announcing it would cut interest rates to 0.25 percent from 0.5 percent, the bank said it plans to purchase $90 billion in corporate and government bonds, “as part of a broad package of measures to stimulate the U.K. economy” following the country’s decision to leave the European Union, The Wall Street Journal reports.
The Brexit decision has caused a great deal of uncertainty and fear among economists, with experts noting they, “expect the economy to be 2.5 percent smaller in three years than they forecast before the referendum.”
Recent reports of economic outlook have indicated to some economists that the nation “is plunging toward a recession,” reports Business Insider.
The Bank of England’s Monetary Policy Committee released a statement at the conclusion of its meeting Wednesday, noting that “the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly.”
The bank cut its projections for growth by over half, down to 0.8 percent from 2.3 percent, reports The Telegraph.
A recent survey of purchasing managers’ index, a survey showing business activity, illustrated the beleaguered state of the British economy in the wake of Brexit. The survey reports that England’s services sector, comprising some 80 percent of the British economy, fell 4.9 percent just one month after Brexit. Business confidence has drastically fallen, down from -5 percent earlier this year to -47 percent as of July, reports Trading Economics.
Bank of England Governor Mark Carney said that, “by acting early and comprehensively,” the central bank “can reduce uncertainty, bolster confidence, blunt the slowdown, and support the necessary adjustments in the U.K. economy,” reports The Wall Street Journal. He also added that all the components of this policy have “scope to be increased.”
The board of the Bank of England unanimously agreed on lowering interest rates, but three dissented against the proposed bond-buying program.
The bank announced that these measures will last till “September 2016 as a precautionary step to provide additional flexibility in the Bank’s provision of liquidity insurance,” according to the Monetary Policy Committee.
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