More interest rate cuts and QE to try to revitalise economies

Another day, another bout of stimulus into the UK, European and Chinese economies.

The Bank of England today announced a £50 billion increase in quantitative easing (QE) to £375 billion and it left interest rates at a record low 0.5%, a level maintained since 2009.  

The BOE will continue to buy more Treasury bonds from banks and other financial institutions, in theory allowing them to reinvest in loans or to buy other assets. Whether this is happening is questionable, with QE more likely bolstering battered bank balance sheets with limited positive impact on the broader UK economy.

The European Central Bank cut interest rates by 0.25% to 0.75% and reduced the overnight deposit rate to zero and so giving European banks an incentive to borrow money from it and lend to others at minimal risk.

The People’s Bank of China cut its benchmark interest rate with the one year lending rate dropping by 0.31% to 6%, giving a strong signal that the Chinese authorities continue to worry about a hard landing for the economy in the face of weakening export demand particularly from Europe.

Contrarian Investor UK