'We're not done' says Bank of England boss after surprise rate cut

The new governor of the Bank of England, Andrew Bailey, on his first day inside the central bank's headquarters in London. (PA)

Bank of England governor Andrew Bailey on Thursday said the central bank stood ready to do more to support the UK economy if needed, in the wake of a surprise interest rate cut and pledge to spend hundreds of billions buying UK bonds.

“We’re not done,” Bailey told journalists on a call on Thursday afternoon. “The Bank of England will do whatever the public needs.

“Our duty to the country is to go on doing everything we can.”

Bailey’s comments came shortly after the Bank of England unexpectedly cut interest rates to 0.1% and announced a new £200bn ($244bn) bond buying programme. The measures were meant to calm “disorderly” conditions in financial markets, Bailey said, which had emerged in recent days due to panic over the spread of coronavirus.

The surprise announcement marks only the fourth time the Bank of England has cut interest rates unexpectedly. The third was just last week.

Read more: Bank of England cuts interest rates to record low 0.1%

“This world has moved on at a frightening pace and we’re reacting,” Bailey said.

Bailey and predecessor Mark Carney have previously indicated that the lowest UK interest rates could go was 0.1%. Analysts at Bank of America said the Bank of England had now fired “its remaining ammo,” suggesting it had no more tools in its arsenal to tackle the fallout from Covid-19.

Bailey denied that was the case.

“If you look at the things we’ve gone over the last week, we’ve actually extended that facility for action since then,” he said, pointing to a new commercial paper buying programme that allows the Bank to extend funding to private companies.

The new governor, who only took the job on Monday, also hinted that the Bank of England could create new tools to tackle the crisis.

“We have to be imaginative and we have to be positive,” he said.

Read more: What the interest rate cuts means for your debts and savings

Bailey had hinted on Wednesday that the Bank could pursue so-called ‘helicopter money’ — directly handing cash to citizens. However, he distanced himself from those comments on Thursday’s call, saying no plans were currently underway.

Asked whether he would consider introducing negative interest rates, as much of Europe has, Bailey said: “I’m actually not in favour of negative interest rates.”

But he added: “As a central banker, I would never rule anything out.”

Bailey said the Bank of England currently had no “precise forecast” for the UK economy given the huge uncertainty surrounding the spread of Covid-19.

“Every picture we look at has a very sharp V in it,” Bailey said, referring to projections for a sharp slump in GDP growth.