Borrowers rejoice, savers despair.
The decision by the Bank of England to cut interest rates to a record low of 0.25 per cent dominated the financial news yesterday. The last time rates were cut, back in March 2009, the world was in the grip of the financial crisis. Ah, life was different then. Leicester City were languishing in League One, Labour’s John McDonnell had been suspended from Parliament after picking up the House of Commons mace, and the Bank was pumping tens of billions of pounds into the economy as well as buying government bonds and corporate debt.
Today McDonnell is Shadow Chancellor and Leicester City are about to start the new football season as Premier League champions. That third point, though. Yesterday the governor of the Bank of England announced plans to purchase £60 billion of UK government bonds. This will increase quantitative easing (the introduction of new money into the economy) to £435 billion. The Bank is also going to buy £10 billion of corporate bonds.
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Some commentators believe Britain is on the brink of another recession, although the Bank of England’s quarterly inflation report does not foresee this.
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