MNI: BOE Cuts Rate, Ups QE (TEXT)

     LONDON (MNI) - On 11 March, the Bank of England's three policy committees

announced a package of measures to support UK businesses and households through

this period. In his Budget on the same day, the Chancellor of the Exchequer

announced a number of fiscal measures with the same aim. On 17 March, this

combined package of measures was complemented by the announcement by HM Treasury

of the Covid 19 Corporate Financing Facility (CCFF), for which the Bank will act

as HM Treasury's agent. By purchasing commercial paper, the CCFF will provide

funding to non-financial businesses making a material contribution to the UK

economy to support them in paying salaries, rents and suppliers while

experiencing the likely disruption to cashflows associated with Covid-19.

     In light of actions to tackle the spread of the virus, and evidence

relating to the global and domestic economy and financial markets, the Monetary

Policy Committee (MPC) held an additional special meeting on 19 March. Over

recent days, and in common with a number of other advanced economy bond markets,

conditions in the UK gilt market have deteriorated as investors have sought

shorter-dated instruments that are closer substitutes for highly liquid central

bank reserves. As a consequence, UK and global financial conditions have

tightened.

     At its special meeting on 19 March, the MPC judged that a further package

of measures was warranted to meet its statutory objectives. It therefore voted

unanimously to increase the Bank of England's holdings of UK government bonds

and sterling non-financial investment-grade corporate bonds by GBP200 billion to

a total of GBP645 billion, financed by the issuance of central bank reserves,

and to reduce Bank Rate by 15 basis points to 0.1%. The Committee also voted

unanimously that the Bank of England should enlarge the TFSME scheme, financed

by the issuance of central bank reserves.

     The majority of additional asset purchases will comprise UK government

bonds. The purchases announced today will be completed as soon as is

operationally possible, consistent with improved market functioning. The Bank

will issue further guidance to the market in due course.

     The next regularly scheduled MPC meeting will end on 25 March, with the

minutes published on 26 March. The minutes of today's special meeting will be

released at the same time.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MT$$$$,M$$BE$]