Bank of England Cuts Interest Rate by 0.5%

At 7am this morning, in a response to the economic impacts of the Coronavirus, the Bank of England Monetary Policy Committee (MPC) has cut interest the BoE interest rate by 0.5% (from 0.75 to 0.25%) matching the record low level that was set in August 2016 (and lasted until November 2017). Mark Carney, the outgoing BoE Governor sets out the MPC’s reasons in the BBC presentation (below)…

Mick’s Thoughts

Even before the Coronavirus came along, there were stress signs beginning to emerge in the economy and the stock market had been on a record bull run. Covid-19 has provided the ‘supply shock’ that has pricked the economic bubble – that has been continually pumped up by the endless printing of new money. IMHO, there could be a lot of shrinking to do. Using this interest rate ‘weapon’ now and no doubt, with the spending spree shortly to be announced in the budget… inflation will likely become an increasing threat. If the virus does have anything more than a short-term affect on output, contributing to loss of confidence and ultimately a (possible global) recession and an increase in unemployment, could we end up with a bad dose of ‘Stagflation’?

As ever, please do your own research (DYOR) and make up your own minds accordingly.

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Mick (11th March 2020)