The Bank of England on Thursday cut rates for the first time in over seven years by 25 bps from 0.5% to 0.25% and slashed growth forecasts and launched a new monetary policy weapon in the battle to stop a post-Brexit slump in the U.K. The BoE has made its biggest quarterly downgrade of growth forecasts, reducing expectations for 2017 growth from 2.3% to 0.8%, citing “substantial uncertainty” after the referendum in June which resulted in Brexit.
BoE also announced a new Term Funding Scheme worth up to GBP 100 billion (USD 132 billion) and the purchase of up to GBP 10 billion in U.K. corporate bonds and also expanded its bond buying program which is also known as quantitative easing by GBP 60 billion to GBP 435 billion.
Bank of Japan last week on Friday announced a very modest increase in monetary stimulus. The Japanese economy deteriorating rapidly, the market participants were looking for a strong dose of easing by the BoJ. Unfortunately, the central bank offered the smallest amount of support by increasing ETF purchases and doubling its USD lending facility. This was the minimum that the market was expecting, BoJ did not cut interest rates, did not increase bond purchases or go for unconventional measures like helicopter money. However, on Tuesday Japanese Prime Minister Shinzo Abe’s cabinet approved a 28 trillion yen (USD 274.4 billion) government stimulus package.
The Reserve Bank of Australia (RBA) cut interest rates by 25 basis points to a fresh record-low of 1.50% in its August monetary policy meeting, a decision that was expected by a majority of economists and those in financial markets.