BOE unexpectedly cuts key rate by 50bps to 0.25% to tackle coronavirus, GBP/USD falls below 1.2900

The Bank of England (BOE) unexpectedly cuts its bank rate by 50bps from 0.75% to 0.25%, in a surprise move to cushion the blow of the coronavirus on the economy.

Additional headlines

Announcing policy measures to tackle coronavirus.

Will introduce new term funding scheme for small businesses.

Term funding scheme will offer 4-year funding over next 12 months.

Term lending will be available at or very close to bank rate.

Experience of 2016 TFS suggests new scheme could provide over 100 bln sterling of extra funding.

Term funding scheme and rate cut will help keep firms in business and jobs.

Aims to prevent temporary disruption from causing long-term damage.

Indicators of financial market uncertainty have reached extreme levels.

UK economic activity is likely to weaken materially in coming months.

Temporary but significant disruption to supply chains could challenge cash flows, increase demand for short-term credit.

Financial policy committee cuts UK countercyclical capital buffer to 0% from 1%.

Expects to keep 0% CCYB rate for at least 12 months.

Major UK banks are well able to withstand severe market disruption.

Invites requests from insurers to use flexibility in solvency 2 regulations.

Coordinating closely with treasury and international counterparts.

Will take all further necessary steps to support the UK economy.

Will publish policy minutes on march 13 at 1200 GMT.

GBP/USD reaction

On the surprise rate cut, the pound came under fresh selling pressure, as GBP/USD dropped sharply to a new five-day low of 1.2845.

At the press time, the spot recovers to 1.2875, still down 0.30% on a daily basis.