almost 4 years ago • 2 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 🕵️♂️
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.
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.
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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