The Bank of England swung into action on Thursday against the economic shock from Britain’s vote to leave the European Union, cutting interest rates to near nothing and unleashing billions of pounds to cushion the Brexit blow.
In what one bank dubbed a “sledgehammer stimulus”, the BoE cut interest rates 25 basis points to 0.25 percent and said it would buy 60 billion pounds ($79 billion) of government bonds with newly created money over the next six months.
It also launched two schemes, one to buy 10 billion pounds of high-grade corporate debt and another – potentially worth up to 100 billion pounds – to ensure banks keep lending even after the rate cut.
The Bank said most BoE policymakers expected to cut the rate to even closer to zero later this year.
“By acting early and comprehensively, the (Bank) can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the UK economy,” BoE Governor Mark Carney told a news conference.
Sterling fell 1.2 percent against the dollar following the announcement, while British government bond yields hit record lows and the main share index rose by nearly 2 percent.
Carney said he had unveiled an “exceptional package of measures” because the economic outlook had changed markedly following the Brexit vote. The Bank expects the economy to stagnate for the rest of 2016 and suffer weak growth next year.
Finance minister Philip Hammond welcomed the rate cut and said he and Carney had “the tools we need to support the economy as we begin this new chapter and address the challenges ahead”.