BoE announced emergency measures to counter the economic shocks from coronavirus today, including a rate cut. Bank rate is lowed by -50bps to 0.25% on unanimous vote. Asset purchase target is kept unchanged at GBP 435B. Also, a new Term Funding scheme with addition a incentives for SMEs is introduced.
The central bank said, “the reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.” Additionally, the Financial Policy Committee has reduced the UK countercyclical capital buffer rate to 0% of banks’ exposures to UK borrowers with immediate effect. The rate had been 1% and had been due to reach 2% by December 2020.
Sterling dips mildly after the release but there is no follow through selling so far, despite the unexpected announcement that’s somewhat expected for this week. GBP/CHF’s fall from 1.3110 is in progress. As long as 1.2336 resistance holds, near term outlook remains bearish for a test on 1.1674 low.
