Bank of England Cuts Interest Rates - Economics Assignment Help

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The Bank of England has cut interest rates for the first time in more than seven years and warned high-street lenders to pass on cheaper borrowing costs to customers, in a bigger-than-expected package of measures designed to preventa post-Brexit recession.The Bank cut official interest rates to a new record low of 0.25% from 0.5% and signaled they would be reduced further in coming months as the economic fallout from the vote to leave the EU becomes clearer. The move will bring relief to borrowers but has already angered savers who have been getting low returns for years thanks to rock-bottom interest rates.Desperate to ensure the cut is felt by households and businesses in the real economy, the Bank’s governor, Mark Carney, took a tough line with commercial banks, telling them they had no excuse not to pass the lower official borrowingcosts onto customers.As part of a four-point package, Carney unveiled additional funds for banks to cushion the blow to their profitability from lower interest rates. He personally called bank bosses after Thursday’s announcement to make it clear the Bank wanted to see the full benefits of its anti-recession strategy felt by households and businessesCarney used a press conference to argue that a range of measures was needed now to limit job losses and support growth in the UK economy as it went through “regime change” following the decision to leave the EU. The Bank’s forecasts were for a slower earnings growth and for 250,000 job losses, even with these stimulus measures.Early economic indicators suggest confidence among businesses and households slumped after the June referendum and that a slowdown in spending threatens to tip the UK into recessionCarney rebuffed suggestions the Bank was over-reacting to the Brexit vote and implied the UK would fall into recession without the new measures. “There isa clear case for stimulus, and stimulus now, in order to have an effect whenthe economy really needs it,” he said.Reacting to early economic indicators suggesting demand and output had slowed across all parts of the economy since the June referendum, the Bank announced:

• A cut in official interest rates to 0.25%, the first such move since March 2009;
 

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