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Posted on 06 April, 2020

RATES CUT TO RECORD LOW

The Bank of England (BoE) sanctioned two emergency rate cuts during March in a bid to address the impact of the COVID-19 pandemic, leaving interest rates at a historic low of 0.1%.  Amid growing concerns surrounding the economic repercussions of the COVID-19 outbreak, the BoE announced an unexpected half a percentage point rate reduction on the morning of Budget Day (11 March). This was the first rate change outside of the BoE’s normal Monetary Policy Committee (MPC) schedule since 2008 and reduced the Bank Rate to 0.25%, a record low only previously reached in the aftermath of the 2016 EU referendum….

ECONOMY FACING UNPRECEDENTED SHOCK

Survey evidence suggests the UK economy is shrinking at a record pace following the forced shutdown of businesses across the service sector in face of the COVID-19 crisis. The latest Purchasing Managers’ Index, where any figure under 50 represents contraction, sank from 53.0 in February to a reading of 37.1 in March. This was the lowest figure ever recorded in the survey’s 22-year history, even surpassing the slump in business activity witnessed at the height of the 2008 financial crisis.Data for the survey was collected between 12-20 March, just prior to the government ordering the closure of all pubs, restaurants and other non-essential businesses, and historical comparisons suggest the latest reading is consistent with the economy shrinking at a quarterly rate of between 1.5-2.0%…..

INFLATION EXPECTED TO FALL

The latest batch of UK inflation statistics shows that February’s headline rate fell, with economists predicting a further sharp decline over the coming months. Data produced by ONS has revealed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – dropped to 1.7% in February, down slightly from a six-month high of 1.8% in January. This slight easing in inflationary pressures reflected a fall in the cost of motor fuels as well as often-volatile video game prices…..

For the full FREE article download here: Economic Review – March 2020

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