Investors should keep calm in the face of shock rate cut

Bank of England

Richard Pearson, Director at EQi, comments on the Bank of England's shock 0.25 per cent interest rate cut…

Despite speculation that an interest cut was on the cards, this move by the Bank of England on Budget day was sudden and decisive.

The government might say that the intention is to stimulate economic demand as the coronavirus begins to impact the UK, but the move also allows the Bank to relax capital rules to free up billions of pounds to provide extra borrowing power to the economy.

For savers it’s a pretty dire picture as already paltry rates will fall even further, while investors and pensioners will likely see the returns on their investments tumble as the markets react to the ongoing economic fall out of the virus.

The advice to retail investors is to keep calm. The rate cut could be a short term measure and while the stocks markets have tumbled, they also have a habit of recovering and stabilising. We will also have to wait and see what other measures the new Chancellor will unveil in his Budget today.

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