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The Bank of England has cut interest rates to a new historic low of 0.25% on Thursday (4 August). Here's a recap of what happened today.

  • Bank of England cuts interest rates to 0.25% to balance Brexit slowdown.
  • Bank announces £170bn more quantitative easing & bank lending support.
  • Governor Mark Carney admits monetary policy might not be enough to prevent Britain's economy from slowing down even further.
  • UK growth forecast for 2017 slashed from 2.3% to 0.8%.
  • Bank of England now expects CPI inflation to hit 2.4% in 2018 and 2019.
13:49

Former chancellor George Osborne has given his approval to the Bank of England's decision to cut interest rates.

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12:58

Carney says: "Saving rates are probably going to be low for some time, both in the UK and beyond."

"We will ensure for savers, for pensioners, for pension funds ... that the economy will grow, that there are fewer unemployed, and we adjust to this new equilibrium faster than would be the case."

Mark Carney
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12:55

Carney says the MPC recognises that when interest rates are very low, cuts may not be passed on to mortgage holders, for example.

But the Governor said that the raft of new measures were an attempt to ensure the impact of the cut is not diluted.

The announced Term Funding Scheme is a pure monetary policy instrument that is likely to be more stimulative that the previous Funding for Lending scheme. It charges a penalty rate if banks do not lend.

Carney says" "The banks have no excuse not to pass this cut onto their customers."

12:52

Carney confirms that the Bank expects only limited growth in 2017, but not a recession.

He says today's package means the central bank has "improved the economic prospects of the country",and should mean unemployment is lower, output is higher, and growth is stronger than would otherwise be the case.

Mark Carney
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12:50

Carney says: "We are living through a time of considerably uncertainty."

"If the data is as projected, the majority of Monetary Policy Committee members would anticipate a further rate cut."

12:48

Carney said since the Brexit vote the "9% depreciation of sterling will boost exports and weigh on imports".
The Bank expects several factors to weigh on business investment, including "heightened uncertainty - higher cost of capital".

Mark Carney
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12:44

Carney said today's package of measures are "timely, coherent and comprehensive"

12:43

Carney says gross domestic product growth is expected to be 2.5% lower over the next two years than the Bank had expected in May.

Unemployment will rise from 4.9% to 5.5% over next two years, while consumer price index inflation will reaching 2.4% by this time in 2018.

12:42

During Carney's conference lender NatWest Bank said it will cut interest rates on base rate linked products to 0.25%.

12:39

Carney says the decision to leave the EU markets amount to a "regime change".

12:37

Carney confirms that the Bank has cut interest rates to record lows, boosted its asset purchase scheme by £60bn, decided to start buying up to £10bn of corporate bonds each month, and created a new £100bn funding for lending scheme.

12:36

Bank of England governor Mark Carney said: "The UK's trading relationships are about to change, but precisely how is uncertain."

12:34

At a press conference to explain the historic measures Bank of England governor Mark Carney said: "The degree and composition of this stimulus package has largely been supplied by the decision by the UK to leave the EU."

12:32

The Chancellor Philip Hammond said he welcomed the Monetary Policy Committee's decision.

12:30

The Confederation of British Industry (CBI) has welcomed the decision, indicating lower interest rates and quantitative easing should provide a much-needed boost to UK businesses.

"The combination of a rate cut and more quantitative easing should be a shot-in-the-arm for business and consumer confidence, lowering borrowing costs and keeping liquidity flowing through the economy," said CBI chief economist, Rain Newton-Smith.

"The Bank's action will help restore confidence in the UK economy and what's now most important to businesses is that the Government develops a clear plan and timetable for EU negotiations."

12:25

The pound has sunk following the BoE's rates announcement. As of 12.22pm BST, sterling was down 1.18% to $1.3168.

12:22

Here are some more details over the stimulus package announced by the BoE earlier today.

• The BoE launched a new scheme aiming to provide as much as £100bn of new funding to banks to help them pass on the base rate cut to the real economy. The "term funding scheme" (TFS) will see the BoE create new money to provide loans to banks at interest rates close to the base rate of 0.25%

• The BoE unveiled plans to inject a further £60bn in electronic cash into the economy to buy government bonds, extending the existing quantitative easing programme to £435bn in total.

• A furtehr £10bn in electronic cash will be created to purchase corporate bonds from firms "making a material contribution to the UK economy"

12:19

The BoE's decision has left some unimpressed. Michelle McGrade, chief investment officer of online investment platform TD Direct Investing, has described the move as a "step in the wrong direction".

The decision, she added, will deal a blow to savers.

"We have seen in the major countries, and especially notable in Japan, that very low and in some cases negative interest rates have not had the desired effect in terms of stimulating economies.

"We must not forget that the crucial issue weighing on UK confidence is the uncertainty around what leaving the EU means. The sooner the Government can give us clarity on that, the more chance we have of stimulating confidence and growth.

12:13

The pound has plunged by over 1.5 cents against the US dollar in the last few minutes, to $1.315.

12:12

Predictably, analysts' comments have been pouring in since the BoE announced its decision. Here is a short round-up:

"Markets have been pricing in a loosening of monetary policy ever since the Brexit vote so today's move by the Bank of England is likely to be welcomed by equity investors but is bad news for people with cash savings," said Russ Mould, investment director at AJ Bell.

"There is a big question mark over whether the rate cut will truly make any difference to the economy. Headline borrowing costs have stood at record lows for more than seven years, yet economic growth has remained sluggish.

"It is debatable whether lenders will reduce their variable rate mortgages but highly likely that savings rates will be slashed further.

Mark Carney
iStock, Reuters

"It seems for many savers chickens have come home to roost," said Calum Bennie, savings expert at Scottish Friendly.

"Any false sense of security around the outlook for savers post-Brexit has now been removed. It's particularly ironic that this move is most likely to affect the cash savings of the over 60s, the demographic that were among the most in favour of leaving the EU. This decision has the chance of promising much, but delivering very little."

12:09

Tom Stevenson, investment director for personal investing at Fidelity International, said the Brexit vote forced the BoE into action: "Today's rate cut is the latest symptom of the Brexit backlash," he said.

"Just seven weeks after the decision to leave the EU, signs of a sharp slowdown in activity have left the Bank of England with no choice but to cut interest rates even further to a record low of 0.25%. The Bank's efforts to steer Britain through the post-Brexit economic shock have taken it into uncharted territory."

12:07

What the markets had been waiting for is now official.

12:06

More on the Bank of England's historic decision that has seen the bank cut interest rates to a new low of 0.25% . At the conclusion of its latest Monetary Policy Committee (MPC) meeting on Thursday (4 August), the bank decided to ditch its holding pattern with the benchmark rate having been stable at 0.5% since March 2009, when the global financial crisis was battering the UK.

The move, which was in line with market expectations, was supplemented by an MPC decision to increase the central bank's asset purchase programme to £ 435 bn.

Bank of England interest rate down
iStock

12:01

Bank of England cuts interest rates to 0.25% from 0.5%, downgrades growth, announces £170bn more quantitative easing and bank lending support.