BOE cuts rates in emergency move since financial crisis

Bloomberg

The Bank of England (BOE) cut interest rates in its first emergency move since the financial crisis and announced measures to help keep credit flowing through the economy, saying the coronavirus outbreak will damage economic activity.
Governor Mark Carney and fellow policy makers voted unanimously to cut their main interest rate by 50 basis points to 0.25%, returning it to a record low. In an effort to safeguard businesses that risk being hurt financially by the virus, they also introduced a new program to provide easy and cheap credit. They reduced the amount of capital banks must hold in a further attempt to support lending.
The decision comes a week after the Federal Reserve cut rates by the same amount and just hours before the UK government announces spending measures in its budget.
What investors may like is the BOE is delivering a large rate cut like the Fed, yet is also targeting aid to those businesses and banks who could feel a fallout from a drop in demand because of the virus. The response also signals coordination between the central bank and the government which may again please markets and serve as a model for policy in other economies.
The FTSE 100 Index climbed 1.6%, while the pound initially dropped as much as 1.3% against the euro to the weakest level since October, before paring almost all of its losses.
“The only slight surprise is that there is no forward guidance about the next policy move,” said Allan Monks, an economist at JPMorgan in London, who predicted the rate cut and measures to support bank lending.
Monks argued officials are probably still prepared to lower borrowing costs again at its scheduled meeting on March 26 if the situation worsens.
“And although not currently our call, the next step for the BOE beyond then is QE if required.”