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The bank of England cut interest rates for the first time in seven years and expand the scale of QE

by:Deyuan      2020-12-23
The bank of England cut interest rates for the first time in seven years, the benchmark interest rate by 0. Cut by 25 basis points to 5% 0. 25%, in line with market expectations.

at the same time, the bank of England will increase in the next six months to buy 60 billion sterling bonds, make its bond buying program rose to 435 billion pounds. After the market expected the bank of England will maintain 375 billion bond buying program unchanged.

the bank of England will also buy up to 10 billion pounds in the next 18 months corporate bonds. The bank of England said, a total of 150 billion pounds corporate bonds in line with the purchase conditions, the purpose of buying corporate debt is to promote corporate bond yields are low, so the company borrowing costs fall, in order to realize the transmission of monetary policy stimulus.

in addition, the monetary policy committee ( MPC) Members also voted 9-0 by setting up a financing projects, to support up to 100 billion pounds of loan funds.

in August after the resolution, the bank of England, the total asset purchases could raise up to 170 billion pounds.

the bank of England's meeting minutes, according to the eight month for resolution, MPC members unanimously to cut interest rates, corporate debt purchase plan for eight-to-one, for and against asset purchase scale with a vote of 6-3.


for August 31 October 8 solstice each batch of Treasury bonds that expired during its initial scale reverse auction will be 11. 700 million pounds. Maintain the bond buying program of buying gilts size remains the same, will be the same size according to each period to buy bonds.

no intention to take a negative interest rate

this is the bank of England cut benchmark interest rates for the first time since March 2009.

most of the MPC is expected to further rate cuts this year, and is expected to cut interest rates to near zero at the end of the year.

the bank of England governor carney said that savers returns over a period of time stay low, do not want to see the UK banking sector savings interest rates below zero. He also said that the bank of England has no intention to take negative interest rates, the bank of England's interest rate lower limit is above zero.

he stressed that all the elements in the package of policies have enlarge the space, the bank of England can further cuts if necessary. He also said the bank of England has been ready to take any action when necessary.

to bloomberg Capital Economics economist Jonathan Loynes said that if the economy continues to weaken, the MPC members will continue to face pressure to act, although monetary policy is obviously the limit.

slashed its economic forecast

the bank of England of the 2016 GDP is expected to remain unchanged at 2%, but the expectations from 2, 2017. 3% down to zero. 8%, 2018 GDP forecast by 2. 3% cut to 1. 8%, and expects to have 2 to 3 years after inflation of 2. 4%.

, according to the bank of England cut growth outlook reflects the mid enterprises and the sharp drop in housing investment and consumption is weak.

in addition, the bank of England will be 2 years inflation expectations by 2. 07% increase to 2. Inflation expectations by 2 38%, will be 3 years. 23% increase to 2. 43%, falling house prices is expected in the next 1 years, business investment in 2016 3. Drop by 2%, 75%, 2017 and two years later, the unemployment rate is expected to rise to 5. 6% had expected. 4. 9%.

Hammond said, the chancellor of the exchequer, welcomed the bank of England's decision to use monetary policy to support the economy is right, for the British central bank bond buying program and support new lending plan, oneself and the bank of England governor carney has a tool to support the economy.

after the bank interest rate decision, sterling/dollar lowest intraday reached 1. Before 3112, a resolution down more than 200 points, days of losses to 1. 5%.
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