Head of Macroeconomic Research
Summary: A look at the BoE's response to the pandemic and the market reaction.
Beginning of February: First confirmed COVID cases in the United Kingdom.
March 11: The Bank of England decides to cut interest rate from 0.75% to 0.25% and to launch a term-funding scheme to support SMEs that can provide in excess of £100bn.
March 19: New interest rate cut to an historical low level of 0.10%. At the same time, the BoE steps in further by increasing U.K government bond purchases up to £200bn (with total QE program reaching £645bn).
April 9: The BoE implements temporary monetary financing of the government to fund the immediate cost of fighting the coronavirus without having to tap the gilts market (via the government’s bank account at the central bank, known as the “Ways and Means Facility”). The amount allocated to this new scheme is undisclosed.
June 18: As widely expected, the Bank of England beefs up the QE asset purchase program by £100bn – at the lower end of expectations - to a total of about £745bn. At constant path, the current program would have been exhausted in July. In addition, the main interest rate is maintained at 0.10%. The overarching message remains ultra-accommodative with indications of further measures to come to stimulate growth in H2 this year.
The end of the road
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