Investment - Articles - LGIM comments on BOE announcement

 “As expected, the BoE’s Monetary Policy Committee (MPC) has voted unanimously to cut interest rates to 0.25%. In addition, the BoE extended its quantitative easing programme by £60 billion, launched a £10 billion corporate bond purchase scheme and pulled the trigger on credit easing, with a new funding scheme for banks.

 “The overall package is broad-based – almost a ‘kitchen sink’ approach – and should mitigate the negative impact on banks from ultra-low interest rates. And while not overly aggressive, it allows scope for further expansion if it is required later down the line.

 “In expectation of an interest rate cut, financial conditions have loosened in recent weeks, while the inflationary impact from weaker sterling has also been a factor. The MPC initially had to weigh up risks crystallising from the Brexit confidence shock versus little post-referendum economic data. However, the very latest data readings have pointed to marked slowdown in economic activity.

 “Today’s interest rate cut was therefore widely anticipated, although the package of additional measures to support the economy is more significant in scope than what markets had priced in. In response, both gilt yields and sterling have fallen, while equity markets have moved higher.”