Interest Rates and Monetary Policy: Data on interest rates from the UK, eurozone and the US; a summary of the Bank of England’s and international, quantitative easing policy.

Major central banks around the world have introduced emergency measures in response to the coronavirus pandemic.

UK (Bank of England)

On 6 August, the Bank of England’s Monetary Policy Committee (MPC) left interest rates unchanged at 0.1% and its bond-buying programme (known as quantitative easing, QE) was kept at a total of £745bn.

UK interest rates

In March the Bank announced a series of emergency measures in response to Covid-19. Interest rates were cut in two stages to 0.1% – the lowest they have ever been. On 11 March they were cut from 0.75% to 0.25% and then again to 0.1% on 19 March. On 19 March, the MPC also expanded its quantitative easing (QE) programme by £200 billion, taking the total value of assets it can own to £645 billion. On 18 June, the MPC expanded QE by a further £100 billion, taking the total to £745 billion.

QE consists of the Bank creating new money electronically (as central bank reserves) and then using it to purchase financial assets, mostly government bonds.

The MPC also introduced a number of other schemes. This includes some designed to provide cheap loans to banks, so they have additional capacity to lend to businesses. For more, see section 4.2 of the Library briefing paper, Coronavirus: Economic impact

United States (Federal Reserve)

Responding to the economic impact of the coronavirus outbreak, the Federal Reserve had by 15 March cut interest rates to a range of 0-0.25% from 1.5%-1.75% at the beginning of March. On 23 March, the Fed announced a wide range of measures designed to support the economy. This includes buying debt from the government, corporations and purchasing other securities (such as those backed by mortgages, student loans and other assets). The Fed pledged to buy government debt “in the amounts needed”, with no upper limit. A new loan facility to small- and medium-sized companies was also launched. Policy was left unchanged at the latest Fed monetary policy meeting ending 29 July.

Eurozone (European Central Bank)

At its 16 July meeting, the ECB left policy unchanged, with its main interest rates unchanged at 0.0% and -0.5% (for overnight deposits from banks). On 4 June, the European Central Bank (ECB) expanded its ‘pandemic’ programme of bond purchases (also known as quantitative easing, QE) in response to the deep economic impact of the Covid-19 outbreak. The additional €600bn in planned purchases takes the total to €1.35 trillion. The ECB launched its pandemic response on 12 March and expanded it significantly on 18 March. The ECB has also made cheap loans available to banks to encourage them to lend to businesses.