The Bank of England [BoE] cuts key interest rate from 0.5% to a record low of 0.25%, as all nine members of Monetary Policy Committee [MPC] unanimously backed the decision to make the first rate cut since 2009.
Governor Mark Carney said Aug. 5 that the rate cut supports the necessary adjustment in the UK economy as the outlook has markedly changed. He expects this measure to reduce uncertainty and curb the slowdown.
Additionally, the bank resumes the quantitative easing (QE) program to stimulate the economy after getting the majority of the votes from MPC (6-3). They approved the £60bn bond-buying program, which increases QE to £435bn. The three opposing members prefer to base their judgment on concrete data rather than on surveys.
The bank also revealed the corporate bond-buying system, opposed only by one MPC member, Kristin Forbes, to be used in purchasing not more than £10bn worth of bonds given out by non-financial corporations.
The series of measures serves as a response to surveys after the referendum to leave EU, showing that the aspects of UK economy such as employment, housing, and businesses deteriorating. Likewise, the central bank foresees inflation to be above the target of 2% considering the decline in value of the British pound.
Governor Carney said that rates could still go lower if the subsequent data shows further economic decline. Conversely, he said that people doesn't have to be concerned about the supply of credit and that the modern financial system works. He emphasized that there is no crisis and that leaving EU only indicates a "regime change", which allows the UK to redefine its flow of goods, people, services, and capital.