The Bank of England shocked markets this morning with a dramatic emergency cut to the UK’s interest rates in response to the worsening outbreak of coronavirus, and the feared impact it will have on the UK economy. The cut was announced this morning ahead of today’s dramatic budget, and saw rates dropped from 0.75% to an historic low of 0.25%.
The BoE also announced other measures intended to help businesses that are struggling with the reduction in both supply and demand as a result of the virus. The budget, given by new Chancellor Rishi Sunak, included up to £30bn of spending as a coordinated fiscal response designed to work with the BoE's rate cut, promising to do 'whatever it takes'.
GDP figures released today show that the UK economy stagnated for the past three months, showing how weak it was even before coronavirus struck. With cases increasing and the UK preparing for a significant outbreak, fears of recession have worsened, and both the BoE and the Chancellor are clearly spooked considering today's decisions.
The Pound dropped sharply on the rate cut news this morning, pushing the gold price up to £1,295 per ounce, but has since recovered as markets adjust to all of the measures announced. The FTSE 100, which had made gains this morning has now dropped back to yesterday's closing level. The Dow Jones also dropped 2.5% on open.
While the measures will undoubtedly be a relief to struggling businesses and individuals, savers will see even lower returns for any money kept in the bank. With the BoE saying that rates could be further reduced towards 0% if needed or perhaps even negative, then many savers are looking to alternative ways to save their money, such as gold and silver.