Fidelity | In line with expectations, the Bank of England’s monetary policy committe voted unanimously to cut interest rates – for the first time since 2009 – by 0.25%. It also announced a package of additional measures, such as an extension of the current quantative easing programme (including corporate bond purchases) and a new liquidity line (Term Funding Scheme).
BoE monetary policy
The Bank of England announced it will cut rates for the first time in 7 years, to lowest level ever (0.25%), and expands QE by £60bn (including corp) in an attempt to stimulate the economy.
BofAML | BoE’s decision to hold rates looks like a policy mistake. But one they can rectify quickly, at their August 4 meeting. We expect a 25bp rate cut, credit easing and potentially a QE salvo. We expect slightly less than we thought before yesterday’s meeting. A properly combined fiscal and monetary push seems unlikely: a fiscal stimulus will take longer to design, and may be limited given budget constraints.
It came as a surprise for market makers: the Bank of England left borrowing costs at 0.5% on Thursday in spite of the Brexit fears. Also, the central bank will keep the size of the Asset Purchase Programme at £375 billion and hinted it could launch a stimulus package in August. The pound spiked to two-week high and FTSE 100 turned negative after the announcement.
LONDON | July 9, 2015 | UBS | At one simplistic level the UK budget contained only ‘small’ news, with the net borrowing forecasts not changing too much. But the reality was this was a budget with a huge number of important announcements. For one, it reduced the near-term pace of fiscal consolidation. For another, it spelt out how the government intends to reduce the size of the welfare state.