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.

Central banks around the world cut interest rates sharply during the 2007-2009 financial crisis. Following the coronavirus outbreak, emergency measures have been announced by many central banks.

UK (Bank of England)

On 19 March, the MPC cut interest rates from 0.25% to 0.1%, the lowest they have ever been. It also announced a £200bn expansion of its bond-buying programme (also known as quantitative easing), in order to support the economy and the functioning of the bond market.

UK interest rates

Previously, on 17 March the Government announced the creation of a lending facility run by the Bank of England that will provide loans to larger businesses. The Chancellor said the government would guarantee this lending, for an initial £330bn. Other measures were also announced.

On 11 March, the MPC cut interest rates by 0.5 percentage points. The MPC also announced the introduction of a number of schemes designed to provide cheap loans to banks so they have additional capacity to lend to businesses. Further information on these 11 March measures is available in the Commons Library Insight: “Budget 2020: Measures to limit the economic impact of coronavirus”.

Andrew Bailey, currently Chief Executive of the Financial Conduct Authority, became Governor of the Bank of England on 16 March 2020. He replaced Mark Carney, who had been Governor since 2013.

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.

Eurozone (European Central Bank)

In an emergency move on 18 March, the European Central Bank (ECB) launched a new €750bn programme of bond purchases – on top of the €120bn announced on 12 March – and said there were “no limits” on its commitment to the euro, in response to the Covid-19 outbreak. The ECB left its main interest rate at 0.0% and kept the deposit rate (the interest rate banks receive on overnight deposits with the ECB) unchanged at -0.5%.