The Bank of England (“BoE”) has reduced the Bank Rate by 50 basis points to 0.25%.
The aim of the reduction is to help support business and consumer confidence amidst the Covid-19 outbreak, to bolster the cash flows of businesses and households and to reduce the cost, and to improve the availability, of finance.
The BoE acknowledged that when interest rates are low, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn could limit their ability to cut their lending rates. In order to mitigate these pressures and maximise the effectiveness of monetary policy, the BoE will, over the next 12 months, offer four-year funding of at interest rates at (or very close to) the Bank Rate. Additional funding will be available for banks that increase lending, especially to small and medium-sized enterprises (SMEs).