Business

Interest rates slashed to record low to counter 'economic shock' of Covid-19

The Governor of the Bank of England, Mark Carney announcing an emergency cut in interest rates to shore up the economy amid the coronavirus outbreak. Picture: Peter Summers/PA Wire
The Governor of the Bank of England, Mark Carney announcing an emergency cut in interest rates to shore up the economy amid the coronavirus outbreak. Picture: Peter Summers/PA Wire The Governor of the Bank of England, Mark Carney announcing an emergency cut in interest rates to shore up the economy amid the coronavirus outbreak. Picture: Peter Summers/PA Wire

THE emergency cut in interest rates to tackle coronavirus must translate into real-world support for businesses, the Northern Ireland Chamber of Commerce has said.

The Bank of England slashed interest rates from 0.75% to a record low to 0.25%, in an emergency move to counter the "economic shock" of the outbreak.

The Bank said the decision follows the spread of Covid-19, which has seen stock markets and shares plunge around the world.

It spells good news for borrowers, but bad news for savers.

Chancellor of the Exchequer Rishi Sunak said the cut was part of a joint approach by the Treasury to meet the economic impact from the virus head on.

Outlining the Government's economic response to the Covid-19 outbreak, Mr Sunak unveiled an additional "fiscal loosening" of £18 billion to support the economy this year, taking the total fiscal stimulus to £30 billion.

Welcoming the action taken by the Bank of England, the chief executive of NI Chamber, Ann McGregor said it was welcome news for businesses.

“The bank and financial institutions must now work together to ensure that these policy measures translate into real-world support for local businesses.

“Businesses will want to see banks using new flexibilities to do everything they can to help firms whose cash flow and prospects have been disrupted due to the impacts of coronavirus,” she said.

“We welcome the early announcements of some extensions to bank loans.”

RBS, which owns Ulster Bank, has said it will consider relief on loans or mortgages on a case-by-case basis for those affected by the virus.

In a statement, the Bank of England said the package of measures would help the UK manage through an "economic shock that could prove sharp and large, but should be temporary".

It is the first cut since August 2016 and the first unplanned rates decision since the 2008 financial crisis.

The Bank said: "Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months.

"Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies.

"Such issues are likely to be most acute for smaller businesses. This economic shock will affect both demand and supply in the economy.”