Reactions to BoE interest rate cut to combat coronavirus impact

Market and industry reactions to the bank of England's emergency cut in its base rate to 0.25% from 0.75 as part of a package of measures to combat the economic impact of the coronavirus.

Confederation of British Industry chief economist Rain Newton Smith:

"Measures to help the flow of credit and support businesses potentially facing cash flow issues could make a real difference in the weeks ahead."

"All eyes are now on the Chancellor today to do his part. This is a timely, proportionate response to a serious situation, though it's vital policy is kept under review as things improve."

Institute of Directors chief economist Tej Parikh:

“The Bank’s swift action to shore up confidence and support lending will come as a significant relief to business leaders."

“A rate cut will help to support confidence in the markets, which has taken a severe knock over the past few days. For businesses, the wider package of lending support could be just as crucial in the medium term, to help firms ride out the anticipated difficulties.

“Directors will now be looking to the Chancellor to match this support with fiscal measures to lower costs and coax business investment in the months ahead.”

Ayush Ansal, chief investment officer at Crimson Black Capital:

“The Bank of England has made a massive pre-emptive strike to reduce the potential impact of Covid-19 on the UK economy. The measures ... may prove to be unnecessary but the Bank of England has chosen to err on the side of caution and most will see this as the right move."

“The worry is that a sensible and precautionary move will simply add to the panic gripping the country.”

Richard Hunter, head of markets at interactive investor:

“Markets had been hoping for a coordinated turbocharge from the Central Banks, which given the decreasing lack of firepower for most given the stimulus measures already introduced, could have limited effect. However, if this is accompanied by a pledge from governments to add fiscal stimulus into the mix, the combined statement of intent could well underpin market sentiment."

"With some interest rate cuts already announced globally and hopes for a similar statement from the US imminently, the Bank of England have now made their contribution on the monetary side for easing conditions in what could be a beleaguered UK economy in the short term. The baton now passes to the government ahead of the Budget, where hopes of fiscal policy easing will now be heightened.”

Markets.com analyst Neil Wilson:

"The Bank of England fired its big bazooka today – this is the ‘whatever it takes’ moment. The key question is whether banks will simply lend more?

"While many rightly doubt the efficacy of monetary policy in this environment, we think that the BoE has done two things right: It’s made the rate cut only a part of a package of measures designed to incentivise lending to businesses; and it’s done it in tight coordination with the Treasury, which will launch a bold new spending programme to bolster the economy today. This is the best way to maximise the impact of the cut."

AJ Bell investment director Russ Mould:

“The Bank of England’s decision to cut UK interest rates to a record low 0.25% has fired up the FTSE 100 and European markets,” says Russ Mould, investment director at AJ Bell.

“Lower rates push more savers and investors towards equities in the search of better returns and the Bank’s actions also give businesses more support during a difficult time for the economy."

“The Budget later today should give more information about how the government plans to help businesses and consumers, so combined with the Bank of England’s actions we’re getting much more clarity on the scale of stimulus efforts."

“A rate cut is unlikely to be enough on its own to stop the UK from experiencing a significant economic dent. Low borrowing rates won’t necessarily get worried consumers spending again if they are cautious about going outdoors or are even forced to stay inside because of coronavirus-related issues."

“However, a rate cut is arguably good for some of the heavily-indebted companies on the stock market as markets may assume they could refinance on more favourable rates."

“It would also be good news for people looking to move home as rates on certain types of mortgage deals should quickly come down, making them more affordable. Housebuilders are natural beneficiaries, hence why Persimmon jumped 4.3% and Barratt Developments advanced 3.9% on Wednesday morning."

“Sadly the coronavirus factor puts a spanner in the works and will create uncertainty as to when businesses and consumers are going to get back to normal life.