Fx trading news: Heavy! The Bank of England cut interest rates by 50 basis points in an emergency, and the budget plan is also worthy of attention!
2020-03-12 12:21 from：CAPSTONE author：Jack
Capstone forex trading news: On Wednesday afternoon, the Bank of England suddenly cut the benchmark interest rate by 50 basis points to 0.25%. At a special meeting ending on March 10, 2020, the Monetary Policy Committee (MPC) voted unanimously to pass the decision. This is the first time the Bank of England has cut interest rates outside its normal plan since the 2008 financial crisis. After the news was released, the pound fell more than 100 points against the dollar in the short-term, and the euro rose over 60 points against the pound in the short-term.
The Bank of England also pointed out that the new funding plan will provide additional funding for SMEs. The new SME loan scheme can provide more than 100 billion pounds of loans for four years.
The Bank of England made it clear that the decision to cut interest rates was to fight the epidemic. With the proliferation of Covid-19, the prices of risky assets and commodities fell sharply, and UK government bond yields fell to historical lows, consistent with a marked deterioration in risk appetite and global and UK growth prospects. Financial market uncertainty indicators have reached extreme levels. The price of British bonds rose unprecedentedly on Monday. The yield on the British 2-year benchmark short-term bond fell below zero for the first time, with the lowest reported at -0.04%.
Although the extent of the economic shock caused by Covid-19 is uncertain, economic activity in the UK may weaken significantly in the coming months. Temporary but significant disruptions and weakening activities in the supply chain may challenge cash flow and increase demand for short-term household credit and the company's working capital. For small businesses, such problems are probably the most serious. This economic shock will affect demand and supply in the economy.
Bank of England Governor Carney said at the last press conference that the impact of the new crown pneumonia epidemic may be severe, but it may be temporary. In the next few months, economic activity may show substantial weakness, and economic shocks may Damage to UK supply and demand, and in the past 10 days, there is more evidence that the British retail industry has suffered an increase. Compared with 2008, the current financial system is more robust.
Carney said that by cutting interest rates today, the Bank of England will be able to ensure that the financial system can support the economy, and the Bank of England's measures will resist the long-term damage caused by the epidemic. Interest rate cuts will provide £ 3 billion in funding for households with floating rate loans, and small businesses will benefit from the interest rate cuts.
He also said that the Bank of England's action is a timely and powerful package, and the Bank of England will take all further steps necessary to support the UK economy and financial system. Carney hinted at the possibility of further rate cuts, saying:
At 19:30 tonight, Rishi Sunak, the UK Chancellor of the Exchequer, announced the government's 2020 budget. The British Chancellor of the Exchequer Sunac announced an additional 18 billion pounds of fiscal easing and said that the total fiscal stimulus measures would reach 30 billion pounds. Sunak said:
"The government will announce a temporary new loan plan to cope with the new crown pneumonia epidemic. The total value of the measures is 7 billion pounds. In addition, the government will also provide 500 million pounds of assistance to the welfare system and will exempt some small businesses from business tax.
Sunak also said that the budget is in line with fiscal rules and there is more room left. The UK's fiscal deficit accounted for 2.8% of GDP in 2021-2022. The government will evaluate the fiscal framework and publish a report in the fall.
The report also shows that the UK expects GDP growth to be 1.1% in 2020, previously expected to be 1.4%; the UK is expected to grow by 1.8% in 2021, previously expected to be 1.6%. It is worth noting that the UK ’s GDP growth rate is not expected to take the impact of the epidemic into consideration.
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