The Great British Baking Woe

Image source:

What's going on?

The Bank of England (BoE) tried to thwart the coronavirus effect by announcing a 0.5% cut to British interest rates on Wednesday but the proof, as the Brits say, will be in the pudding.

What does this mean?

The emergency cut probably wasnt much of a surprise to investors: it was only last week that the G7 of which the UKs a member promised to do what it could to limit the coronaviruss impact on growth. But the BoE also announced a new lending program for small- and medium-sized businesses, which aims to cushion the cash flow theyve lost from outbreak-related disruptions.


The BoE hasnt ruled out doing more to help the economy if necessary, either probably a wise move given fresh data out on Wednesday showed the UKs economic growth in January falling short of forecasts. Still, economists are wondering just how well demand-boosting measures like rate cuts will actually go down for an economy thats also reeling from supply disruptions.

Why should I care?

For you personally: Keep calm and lose interest.


Lower central bank interest rates will lead to a fall in commercial bank rates, so it wont be long before youre earning even less from your savings in UK banks assuming you were earning anything to begin with (tweet this). Thats why lower rates typically push investors toward the higher potential returns of relatively risky assets like stocks. But after Mondays dramatic selloff, that might not happen this time around



Zooming out: A labor of gov.


Analysts at JPMorgan reckon the BoEs rate cuts would work well alongside a bump in government spending to support the economy. And on Wednesday, the British government announced exactly that to help combat the outbreak. The decision might perk up global investors: the worlds biggest rail supplier a Chinese company is just one of the companies that could benefit from the UKs move to overhaul some of its infrastructure.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

#YOLO

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.