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Bank of England Interest Rate cut Highlights the Need for an Active Investment Portfolio

JP Buntinx
March 11, 2020

Global consequences of the novel coronavirus are slowly becoming apparent. Various banks mull whether to slash current interest rates, similar to what the Bank of England announced earlier this week.

Bank of England Cuts Rates

During times of financial uncertainty, it becomes increasingly difficult to introduce proper countermeasures. As no one knows how long the novel coronavirus will remain problematic, banks have to introduce emergency solutions. A recent decision by the Bank of England won’t sit well with a lot of people, for fairly obvious reasons.

This week, the Bank of England decided to cut its current interest rates. Not entirely surprising, as interest rates have been a pressing problem in the financial industry for over a year. Some banks still provide positive yields, whereas the ECB is maintaining its negative rates. 

By reducing interest rates from 0.75% to 0.25%, an interesting step is taken. This 66% reduction is very steep, and was introduced seemingly overnight. According to bank officials, it is necessary to go down this route to respond to the economic shock of the novel coronavirus. It will also bolster cash flows of businesses and households. 

It’s not all Doom and Gloom

For the average saver, this interest rate cut is problematic. Money stored in a savings account has not yielded much interest for many years now. As more time progresses, that situation only seems to grow worse. There are many other alternative solutions to make money, such as the ones offered here on Bar9.

Despite the doom and gloom, there may be some benefits due to the rate cut as well. Specific types of mortgages – tracker mortgages, in this regard – will get cheaper. Their interest rate to be paid will drop, for the foreseeable future. Once things calm down and the Bank of England reverses its decision, the payments will change accordingly.

As officials state, these measures improve the availability of finance. That aspect is crucial, especially for businesses. Smaller stored owners will face the biggest problems during this novel coronavirus outbreak.

Borrowing money becomes cheaper, and more money will begin flowing through the economy in general. That means now is a great time to begin investing in assets that can withstand major financial uncertainty, such as gold and other metals.

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