BoE Adds $125 Million Of Support

BoE Adds $125 Million Of Support

over 3 years ago2 mins

The Bank of England (BoE) isn’t here to mess around: it announced on Thursday it’d increase its support for the UK economy by an extra $125 billion 🇬🇧

What does this mean?

The BoE’s been buying up bonds in the UK since coronavirus struck, but it would’ve exhausted the money it’d earmarked by next month if it kept going at its current rate. So the Bank’s now extended its runway by bolstering the program with more cash 💷 That’ll help keep borrowing costs in the UK low: the BoE’s ever-present demand for bonds should buoy their prices and keep their yields low, which will in turn help provide low interest rates to new borrowers (since lenders use existing bond yields as a benchmark for new rates). The improved access to cheap money should help the UK get back on its feet as lockdown continues to loosen and businesses reopen.

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Why should I care?

The BoE chose not to cut the UK’s record low interest rates, which makes sense considering the Bank pointed to growing evidence that the economic damage would be less severe than initially thought 👉 But try telling that to April – which saw the British economy shrink by the most ever, according to data out last week – or to the more than 600,000 workers who lost their jobs between March and May. Over 1.5 million more Americans filed for unemployment benefits last week too – a smaller-than-expected drop from the multiple-millions of weekly new additions we’ve seen recently.

Source: Bloomberg
Source: Bloomberg

Across the channel, analysts and economists witnessed a busy Thursday for the European Central Bank (ECB). Commercial banks borrowed a record $1.3 trillion from the ECB’s program that provides them with super-cheap loans in the hopes it’ll keep them lending and the eurozone economy bubbling 🥂 Having since upped its Europe-wide support, the ECB’s now probably just hoping to shorten the economic downturn, rather than avoid one altogether.

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