On 23rd of June 2016, a referendum was held in Britain regarding the British exit from EU- Brexit. The result was in favour of the Brexit. Many economists feared the implications of the Brexit on the economy. Pound depreciated against the dollar to its lowest level since 1985 as the market reacted to the result of the referendum. The plunge halted after Bank of England’s announcement that it was ready with £250bn extra funds to ensure the stability of the market. Britain lost its AAA credit rating which will cause increase in cost of Government borrowing going forward.
In order to boost the economy and confidence, the Bank of England has announced following measures:
Reducing the base rate to 0.25% from 0.5% earlier. This is a record low and first cut since 2009;
£100Bn scheme to force banks to pass this benefit to businesses and the households by lending them at a rate close to the base rate of 0.25%.
Buying back of £60Bn of UK government bonds and £10Bn of corporate bonds to increase liquidity in the market and increase spending.