The Bank of England has announced an emergency cut in interest rates in light of the coronavirus outbreak.
Rates have been reduced from 0.75 per cent to 0.25 per cent, which takes borrowing costs down to the lowest level in history.
Mark Carney, Governor of the Bank of England, said: “There has been a sharp fall in trading conditions.”
“The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large and sharp, but should be temporary.”
“I would emphasise the direction is clear, though the orders of magnitude are still to be determined.”
Faisal Islam, Economics Editor at the BBC, said: “The key target of this move is the cashflow of small and medium-sized businesses, which could be hit by a combination of slumping demand, trade difficulties, and staff absence.”
“The Bank and the Treasury agree that this will be a temporary shock. The aim, therefore, is to prevent unnecessary permanent economic scars. Alongside Budget measures, it is designed as a bridge beyond the coronavirus.”
“So the Bank’s base rate is slashed to its record low, first reached in the aftermath of the EU referendum, but as important is the new TFSME, the ‘Term Funding scheme with additional incentives for Small and Medium-sized Enterprises.’”
“This proved rather successful after the EU referendum, and the aim is to get the banks to pass on the rate cut in full to businesses particularly small and medium-sized firms, which face the greatest pressure to cut staff or hours in a crisis.”