Thursday 26 March 2020 8:35 am

BoE and Treasury to resume coordinated response to prevent coronavirus slump

The Bank of England (BoE) and Treasury will resume their coordinated drive to prevent the coronavirus-related economic shutdown from triggering a deep recession.

The BoE, which has already made two emergency cuts to interest rates this month, is reportedly likely to hold off on further action when it makes a statement at noon after its scheduled March meeting.

Read more: Government and Bank of England urge banks to keep lending despite coronavirus uncertainty

Governor Andrew Bailey, who has been in the job for less than two weeks, and other bank officials have suggested they will not cut the rate from its all-time low of 0.1 per cent into negative territory.

They are instead likely to emphasise their determination to take more radical measures, likely a further increase in the quantitative easing programme.

Jasper Lawler, head of research at London Capital Group, said: “We’re not looking for the Bank of England to cut interest rates below the new 0.1 per cent. Negative interest rates now would probably just smack of desperation.”

“There’s also a widespread view that the negative rates experiment in the Eurozone has failed. Some level of coordination with the UK Treasury is likely with Chancellor Rishi Sunak expected to announce plans to support the self-employed.”

Sign up to City A.M.’s Midday Update newsletter, delivered to your inbox every lunchtime

Chancellor Rishi Sunak is expected to explain how he plans to support Britain’s 5m self-employed workers through the coronavirus crisis. He has faced criticism over uncertainty on measures for the self-employed, as many workers ignored calls to stay at home.

Last week Sunak took the unprecedented step of announcing the government would pay 80 per cent of the wages of private sector workers, in a bid to reduce unemployment.

Read more: Bank of England will ‘closely’ monitor credit to economy amid coronavirus crisis

The Treasury and BoE launched the lending facility, Covid Corporate Financing Facility (CCFF), last week.

It is designed to support liquidity among larger firms, helping them to bridge the disruption to their cash flows through the purchase of short-term debt in the form of commercial paper. 

Get the news as it happens by following City A.M. on Twitter