The outbreak of the pandemic has led to a sharp reduction in economic activity and turmoil in the financial markets. Its adverse economic impact is being felt at present and will continue in the days, months and years ahead. To minimise the damage, central banks and governments have tried to step in, with a substantial increase in monetary easing. The Bank of England has decreased the bank rate to 0.1% and launched a new Term Funding Scheme with additional incentives for small and medium enterprises. The financial-policy committee of the Bank of England has also reduced the countercyclical capital buffer for UK banks to a 0% rate for at least 12 months, with an expectation that it will result in a substantial increase in lending.
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