BoE, Coming Down with the Pandemic While in Brexit Pincer
England, which has the second largest economy in Europe, has come down with the coronavirus outbreak during the economic recession that started with the process of leaving the European Union.
The quarantine measures taken within the scope of the fight against the pandemic made the country’s economy, which was already struggling with the recession, confront with a more difficult crisis to manage. In a statement regarding this process, the international credit rating agency Moody’s warned that a no-deal Brexit would seriously affect Britain’s recovery from its deepest recession in the last century (www.bloomberght.com).During the period when difficult times awaited the country’s economy due to Brexit and the pandemic, the Bank of England implemented a series of measures simultaneously with the central banks of the developing countries. The Bank of England (BoE) gathered extraordinarily on 11 March and cut the policy interest rate from 0.75 to 0.25% by a 50-basis point reduction to combat the pandemic. The said rate cut was BoE’s first rate cut since August 2016. In its statement, the bank also decided to implement a new term funding scheme for SMEs and to continue the asset purchase program at the level of £435 billion (Anadolu Ajansi 2020a-g).
BoE, which convened extraordinarily for the second time in March, reduced the policy interest rate by 15 basis points to 10% 10 days after the first meeting. At the same meeting, the asset purchase program, which was at the level of 435 billion pounds, was increased by 200 billion pounds to 635 billion pounds. BoE, which kept the policy interest rate constant at 0.10% at the April, May and June meetings, increased its asset purchase program by another £ 100 billion at the meeting in June (www.dunya.com).
The UK economy, which had a tough second quarter as was the case in the world economies, contracted by 6% in March and 20% in April. While the Bank of England warned that the country’s economy could face the deepest crisis of the last 300 years in its predictions at the beginning of the outbreak, officials stated that the measures taken started to show signs of growth for the ongoing period (Anadolu Ajansi 2020a-g).
The virus, which spread throughout the world in March, significantly increased the downside risks on the global economic outlook. Due to the increasing volatility in international markets, developed and developing countries started to adopt unconventional expansionary monetary and fiscal policies.
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