The Bank of England (BoE) has cut interest rates for the second time in just over a week as it looks to support the UK economy from the fallout of the coronavirus pandemic.
Interest rates have been cut to 0.1%, down from 0.25% following an earlier cut of 0.5% last week, their lowest level since the Bank was founded in 1694.
It follows action from other central banks around the world, including in the US where the Federal Reserve cut rates to near zero on Monday.
The BoE's Monetary Policy Committee also voted at the special meeting to increase its holdings of UK government and corporate bonds by £200bn, to a total of £645bn.
In making its decision the BoE said the £350bn of support for the UK economy announced by Chancellor Rishi Sunak was not enough on its own and a ‘further package of measures was warranted’.
It added, ‘The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary.’
The move is expected to calm UK government bond markets somewhat, with investors concerned about how much the government will have to borrow to help businesses and the public.
AJ Bell chief investment officer Kevin Doran called the rate cuts the 'solutions of yesteryear' when credit and liquidity were the problems.
He added, 'This time it truly is different - with a workforce on lockdown, there’s a production chasm about to open up.
'To fill the gap policy makers need to be working with governments to introduce formal debt relief. Not forbearance, not interest holidays, but genuine relief from servicing debts as the world enters its enforced hibernation.'
Premier Miton chief investment officer Neil Birrell said the rate cut 'was always coming' but that it will make 'no real difference'.
While Dr. Kerstin Braun, president of finance provider Stenn Group, said reduced rates 'will not be enough to prop up the economy alone', with global shares likely to fall further in the coming days.
