In a move that caught many off guard, the Bank of England has announced an emergency interest rate reduction, bringing the rate down from 0.75% to 0.25%. This marks the lowest borrowing cost in history.
The Bank of England hopes that this 0.5% interest rate cut will free up billions of pounds, providing banks with more lending power to help stimulate spending and boost the economy. The Coronavirus pandemic has been largely attributed to this unexpected rate change.
The Global Spread of Coronavirus
The Coronavirus has spread rapidly across the world, with hotspots in China, Italy, and Iran. However, new cases are being reported daily from dozens of other countries and infections in new countries are being reported regularly.
The fear among consumers has led to panic buying in many countries. In the UK, toilet rolls, pasta, and baked beans have been popular items that have sold out.
The virus has had significant impacts on the business world, with Flybe ceasing trading due to reduced demand for seats and other airlines, such as Cathay Pacific, reporting profit warnings.
Consumers are Holding Back on Purchases
The Bank of England’s outgoing governor, Mark Carney, announced the interest rate cut in the morning and also highlighted the state of the economy during this crisis.