Interest rates cut to tackle coronavirus fears

Interest rates have been cut Picture: Yui Mok/PA Wire

Interest rates have been cut Picture: Yui Mok/PA Wire - Credit: PA

The Bank of England has cut its main interest rate to 0.25% from 0.75% in response to the threat of coronavirus.

The central bank said the decision came following the spread of coronavirus, which has seen stock markets and shares plunge around the world.

In a statement, the bank said its role is to help UK businesses and households manage through an economic shock from coronavirus 'that could prove sharp and large, but should be temporary'.

It is the first cut since August 2016 and the first unplanned rates decision since the 2008 financial crisis.

It said: 'Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months.

'Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies.

'Such issues are likely to be most acute for smaller businesses. This economic shock will affect both demand and supply in the economy. '

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The rate cut decision was taken at a special meeting of the Monetary Policy Committee which ended on Tuesday and the vote to cut the bank rate by 50 basis points to 0.25% was unanimous.

Businesses across the country have already reported sharp falls in custom, as tourist numbers dry up and more people stay home, and are making preparations for widespread self-isolation.

The British Chambers of Commerce director general Dr Adam Marshall said: 'Businesses will welcome the decisive action taken by the Bank of England to support the economy at this delicate moment.

'The Bank and UK financial institutions must now work together to ensure that these policy measures translate into real-world support for firms on the ground.

'We will want to see banks using new flexibilities to do everything they can to help businesses whose cash flow and prospects have been disrupted due to the impacts of coronavirus.'

READ MORE: Latest figures show coronavirus cases rise by five in East of England

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