Interest rate cut suggests budget is going to be more dramatic than we thought
Wednesday 11 March 2020 12:21, UK
The scale of this interest rate cut is dramatic and is definitely a surprise in terms of timing.
It's very unusual to have an emergency cut outside of the Bank of England's normal schedule, so it might take you back to the financial crisis.
The Bank of England has cut the main interest rate from 0.75% to 0.25% in response to the coronavirus, and I don't think it is a coincidence that this has come on budget day.
It suggests there is potentially going to be some big stuff in the budget later.
The idea is to do a shock and awe set of measures. You've just had the monetary - they've announced that interest rates have been cut. You will now have the fiscal policy potentially coming along later in the form of the budget.
It potentially suggests we're going to have a more dramatic move from the government than I think people had expected in the budget.
It also suggests that both the Bank and the government are moving in lockstep at the moment to try to do everything they can to prevent a recession. And indeed an economic crisis.
This interest rate cut is half a percentage point and suggests the government is really worried.
It's down to 0.25%, which is as low as they've ever been in the past.
It follows the Federal Reserve, the US central bank, cutting interest rates last week.
So there was an expectation that the rate would be cut here too, but it is perhaps bigger and earlier than expected.
There's also measures to help small businesses with some kind of short-term funding scheme, similar again to some of the stuff we saw in the financial crisis.
The big question will be to see how people react to this interest rate cut.
This will affect your mortgage - if you have a floating rate mortgage it's suddenly a lot cheaper - and obviously it will affect your savings as well, which will be a frustration for those who were hoping for interest rates to go up.