BoE unveils GBP 50 bn stimulus

Continuing efforts to prop up their sagging economies, European and Chinese central banks slashed interest rates while the Bank of England [BoE] unveiled fresh stimulus measures worth 50 billion pounds.

The latest moves come at a time when both the developed and the developing world – including India and China – are facing sluggish growth prospects and high unemployment levels.

Seen as a surprise, the People’s Bank of China cut rates for the second time within a month, amid the economy witnessing one of the worst slowdowns in the recent years.

The European Central Bank [ECB] too eased their monetary stance, as part of efforts to boost the fortunes of the region reeling under a severe debt turmoil.

Embarking on the stimulus path again, the Bank of England has come up with another round of steps that would pump in another 50 billion pounds into the system.

The Chinese apex bank has slashed key lending rates to 6 per cent from 6.31 per cent. The deposit rate too has been cut to 3 per cent from 3.25 per cent.

Unlike India, China in recent weeks has been providing incentives to bolster their economic growth.

Despite high expectations, the Reserve Bank of India last month decided to hold rates, citing that monetary easing could further exacerbate inflationary pressure.

The European Central Bank has cut the benchmark interest rate to record low of 0.75 per cent from 1 per cent. Further, ECB has reduced the interest rate on marginal lending facility to 1.50 per cent from 1.75 per cent.

‘The interest rate on the deposit facility will be decreased by 25 basis points to 0 per cent,’ it said.

The Bank of England on Thursday increased the size of its asset purchase programme, that would see another 50 billion pounds coming into the system. With this, the total size of asset purchase programme has ballooned to 375 billion pounds.

The Bank of England’s Monetary Policy Committee has decided to keep the official rate paid on commercial bank reserves at 0.5 per cent.

‘UK output has barely grown for a year and a half and is estimated to have fallen in both of the past two quarters... business indicators point to a continuation of that weakness in the near term, both at home and abroad,’ BoE said in a statement.

According to the BoE, concerns remain about the indebtedness and competitiveness of several euro-area economies and that was weighing on confidence in the UK.
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