The Bank of England has announced an emergency cut in interest rates to shore up the economy amid the coronavirus outbreak.
Policymakers reduced rates from 0.75% to 0.25%, taking borrowing costs back down to the lowest level in history.
The Bank said it would also free up billions of pounds of extra lending power to help banks support firms.
It comes as the chancellor is expected to announce further measures to support growth and jobs in the Budget later.
‘Maximum impact’
Mark Carney, the outgoing governor of the Bank of England, said policymakers had seen a “sharp fall in trading conditions”, including spending on non-essential goods.
“The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large and sharp, but should be temporary,” he said.
He said the Bank’s co-ordinated action on Budget day was designed to have “maximum impact”.
Mr Carney stressed that the economic damage caused by the coronavirus remained unclear. However, he suggested that the UK economy could shrink in the coming months.
He said early evidence from China suggested that the world’s second largest economy was on course to contract in the first quarter.
Other nations were experiencing a “similar shift”, he said. “I would emphasise the direction is clear, though the orders of magnitude are still to be determined.”
The sudden cut in the Bank rate will immediately reduce the mortgage bill of a minority of homeowners. Others will have to wait to see how their home loan provider reacts at a time when mortgage rates are already at very low levels.
Little will change for savers, who have had to endure years of low returns anyway. They may take heart from the fact this is a temporary measure from the Bank.
Most people are, of course, savers and borrowers.
As well as concern over their physical health from coronavirus, their financial health will primarily depend on their job.
This emergency action is clearly designed to help protect businesses, particularly small and medium-sized ones, and in turn the employment of millions of people.
