BoE to leave ‘fiscal stimulus’ to Theresa May

One of the after effects of the Brexit vote is the slowly emerging consequences which have been long predicted by its non-supporters.

To absorb a huge economic impact and to tackle recession, the Bank of England launched its largest stimulus package following the crisis.

Some of which is an interest-rate cut for as low as a record breaking 0.25 per cent, a new £70 billion (HK$710 billion) bond-buying scheme and a £100 billion fund to further encourage banks to pass offer cheap rates to borrowers. An offer which Bank of England governor Mark Carney calls an “exceptional package”.

These are some of the acts that the Bank of England has been persuaded to decisively do weeks after the British Referendum vote. Despite all these efforts, Carney says that the bank expects the biggest growth plunge in twenty years along with the loss of almost 250,000 jobs.

Former Prime Minister David Cameron resigned after the declaration of the British Exit stating that it wouldn’t be right for him to further lead the country through the coming months. Current Prime Minister Theresa May has already set the country’s positions with leaders from countries such as France, Germany and other European nations.

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The current status on the effect of Brexit to the world economy has not been massive so far but the status will depend on the government’s next action after the Bank of England package.

Bond purchases to follow after lower interest rates

After the decision to drop down interest rates for the very first time since 2009, the Bank of England also made the decision to absorb an even bigger Brexit effect by announcing that it would buy £60 billion worth of government debt.

Aside from this, it was also announced that the Bank of England would also launch two new schemes to make sure that banks would keep lending despite the cut in interest rates. One of which is to purchase £10 billion worth of high-grade corporate bonds and another one which could possibly amount to cost up to £100 billion.

Other banks expected to follow rates

After the historic 0.25% drop launched to avoid a recession, Carney also stated that he expected other banks to follow the rate cut and even offered a £100 billion fund in aid. It is also said that customers and borrowers with savings and mortgages following the Bank base rate will be given an automatic cut.

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