The Bank of England low rates for the first time since 2009 and resumed bond purchases – Yahoo Finance Spain

By David Milliken and Ana Nicolaci da Costa

LONDON (Reuters) – The Bank of England cut on Thursday its benchmark interest rate by first time since 2009 and said it would buy government debt amounting to 60,000 million pounds ca to cushion the impact of the vote last June 23 in the British opted to leave the European Union.

central bank as expected, which cut its benchmark interest rate from 0.5 to historical lows of 0.25 per cent said it expected the British economy to stagnate in the remainder of 2016 and that its growth is weak year next

But also launched two new programs. one to buy corporate bonds with high ratings for 10,000 million to 10,000 million, and another which could potentially reach up to 100,000 million pounds to ensure that banks continue to lend even after the rate cut.

The pound fell 1 percent against the dollar just after the announcement, while yields on gilts touched historic lows and the main British stock index rose one percent.

most of the members of the monetary policy committee also expect the bank to cut rates back to a level “close but slightly above zero” if the economy evolves with the expected weakness.

“After the vote in the UK to leave the European Union, the exchange rate has fallen and growth prospects in the short and medium term have weakened considerably,” the central bank said in its quarterly report inflation.

Finance Minister, Philip Hammond, welcomed the rate cut and said he and the governor of the Bank of England, Mark Carney, possessed “the necessary tools to support the economy in the beginning of this new chapter and address the challenges ahead “.

members of the committee were not completely united in response to the impact of brexit.

The reduction in interest rates and measures to ensure that banks passed on to consumers-known as term refinancing program (TFS by its acronym inglesas- were unanimously support.

But three policy-makers Kristin Forbes, Ian McCafferty and Martin Weale- opposed to raising the overall objective of the program of purchases of government bonds to 435.000 million pounds, from 375,000 million reached in late 2012.

SLOWDOWN AHEAD

Although several business surveys show that the British economy has slowed sharply and might even be entering recession, it is too early to see how the brexit it is affecting production.

the Bank of England kept its growth forecast for this year at 2.0 percent, after the first half from expanding faster than expected in May .

But slashed the forecast for 2017 from 2.3 percent to 0.8 percent, a reduction higher than reigstrada during the financial crisis. Growth prospects for 2018 were reduced to 1.8 percent.

The Bank of England also significantly revised up their inflation expectations after the biggest devaluation of the pound since the financial crisis, now anticipating a rate of 2.4 percent in 2018 and 2019. The commission monetary policy said the cost for trying to online prices with the aim of 2 percent in the immediate future would be greater than their benefit.