The Bank of England has announced a Post-Brexit stimulus package:
• As widely expected, the Bank of England announced a large monetary stimulus package, in the aftermath of the UK’s vote to leave the European Union. The total package included a cut in the key policy interest by 25 basis points to 0.25% – a record low – along with the introduction of a £100bn Term Funding Scheme to encourage banks to pass on the reduction in rates, £10bn purchase of UK corporate bonds, as well as a £60bn increase to the bond purchase programme.
• The Governor of the Bank of England described the package as “exceptional measures” and stated that “By acting early and comprehensively, the (Bank) can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the UK economy”. Justifying the measures, the Bank made the sharpest ever downgrade to its economic growth forecasts in more than 20 years.
• Growth next year is expected to be 0.8%, down from 2.3% pre-referendum. Carney stated that the decision to leave the EU marked a “regime change” and “would ‘redefine its openness to the movement of goods, services, people and capital”.