Financial Markets Review by Lloyds TSB

The BoE effectively ran out of policy options to support the economy when it cut base rate to 0.50% and so decided to inject liquidity by buying UK government debt.

BoE cuts base rate to 0.50%, will purchase gilts

The BoE effectively ran out of policy options to support the economy when it cut base rate to 0.50% and so decided to inject liquidity by buying UK government debt.

The ECB cut its benchmark interest rate to 1.5%, and sharply cut its 2009 forecasts for gdp growth and inflation. Interest rates could be cut to 1% in April.

The FTSE-100 fell below 3,500 on Friday to the lowest level since March 2003 as investor pessimism intensifies. The index has lost more than 20% since January.

The Turkish lira was among the worst performing currencies this week in emerging markets. Investor confidence fell as plans to appeal for IMF support may be delayed.

UK gilt yields plunged in response to the BoE’s decision to purchase £75bn of assets, while a surge in the US unemployment rate also weighed on bond yields.

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