Bank Rate cut and other new measures: what do they mean?

On Thursday 4 August, we announced new measures designed to support growth and achieve our 2% inflation target.
Published on 04 August 2016

In August 2016 we introduced a package of measures to support the economy, including:

  • A cut in Bank Rate from 0.5% to 0.25% alongside a new measure to ensure that banks can pass this on to their customers.
  • An extension of our programme of Quantitative Easing. We will purchase an additional £60 billion of government bonds and £10 billion of corporate bonds. 

What is quantitative easing?

Quantitative easing (QE) is when a central bank, like the Bank of England, creates money and uses it to buy financial assets – mostly government bonds – from businesses like pension funds. The aim of QE is to encourage spending, boost overall economic activity and keep inflation on track to meet the Bank of England’s 2% inflation target by pumping new money into the economy.

Find out more information about quantitative easing.

Why did the Bank of England introduce these measures?

The Bank of England has introduced these measures to provide additional support to the UK economy as it adjusts to the new reality and uncertainties around leaving the EU. These uncertainties are expected to cause: some companies to delay major decisions such as investment and hiring plans; lower house prices; and less spending by households. If we hadn’t acted quickly these uncertainties would have meant lower economic activity and more people out of work.

How will the new measures help you?

The Bank of England has acted quickly to support UK households and companies. All the measures have the same aim: to increase the amount of spending in the UK economy and improve the economic outcomes for the people of the United Kingdom. That means more people in work and higher wages, consistent with the Bank’s target for inflation.

Who decided upon these measures?

The Bank of England’s Monetary Policy Committee (MPC), which is chaired by the Governor of the Bank of England, Mark Carney. The MPC meets throughout the year to set monetary policy – Bank Rate and the amount of QE – in order to deliver the 2% inflation target.

What might happen in the future?

Depending on how the economy evolves, the Bank of England will take whatever actions are needed to meet the Government’s 2% inflation target in a way that helps to sustain economic growth and employment for the good of everyone in the United Kingdom.

Where can I find out more?

The latest Inflation Report, which is published once a quarter, contains the MPC’s latest assessment of the UK economy and explains its monetary policy decisions.


Other news

Give your feedback