Bank Of England: Biggest Recession Ever

Bank Of England: Biggest Recession Ever

almost 4 years ago2 mins

The Bank of England (BoE) left the UK’s key interest rate unchanged on Thursday, but the central bank's governor has said he has a license to, er, cut it below zero if he has to 🕵️‍♂️

What does this mean?

The BoE’s no more immune to the global economic uncertainty than anyone else, so it shied away from making predictions as it normally would. It instead outlined a scenario based on the assumption there’d be a gradual reduction in lockdown measures in the third quarter of this year 🤔 In that case, the unemployment rate would rise to 9% from around 4% now, and the UK economy would shrink by 14% in 2020 – its biggest decline on record – before rebounding with 15% growth in 2021.

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While the BoE didn’t announce any new economy-supporting measures this time around, it did say it’s willing to do so if needed – even if that means turning the country’s record-low interest rates negative like elsewhere in Europe.

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Why should I care?

BT might’ve welcomed some extra support: the British telecoms company announced on Thursday it’d be suspending its shareholder dividend for the first time ever as a public company 😱 But while BT would rather use that cash to complete fiber infrastructure installation plans, its investors would probably prefer the payouts, hence its share price fell 8%. Adding insult to injury was the confirmation of the mooted merger between Telefonica and Liberty Global’s UK arms, which will give BT a new $38 billion rival.

Low central bank interest rates lead to lower interest rates on your cash savings, which could encourage you to move your money into bonds or stocks to generate a higher return 💷 But if you think you’ll need access to that money in the next couple of years, it’s probably worth suffering near-nothing interest in exchange for the certainty your cash will be there when you need it.

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