What's going on?

Britain�s central bank, the Bank of England (BoE), took action on Thursday to combat the economic threat posed by Britain�s vote to leave the European Union (EU).

What does this mean?

The BoE decreased its target interest rate by 0.25% (that will make things like mortgages a little cheaper). Perhaps more interestingly, it authorized itself to directly buy UK government bonds and bonds issued by companies. The idea is that by buying such bonds, the price of those bonds will go up, which means that the interest rates those bonds pay to investors (a.k.a. the yield) will go down (Why? Click here for an explanation). The point is to lower interest rates in the UK so that people and companies can borrow money at a lower cost � which will hopefully spur them to do so and to spend that money on economically productive things, like buying new equipment.

Why should I care?

For markets: Lower interest rates typically mean a weaker currency and more support for stocks.
Usually, when a country�s currency declines in value, it puts upward pressure on stock prices (because, for example, it makes foreign profits worth more when translated back to the home country’s currency � for a longer explanation, click here). This is particularly true in the UK, where lots of the biggest UK-listed companies have significant overseas operations (like HSBC) – which helps explain why UK stocks went up 1.5% on Thursday.

The bigger picture: Increasing government spending is becoming popular (again).
On Thursday, the BoE wrote a letter to the UK government saying, essentially, that it shouldn�t rely on the BoE alone to boost the economy. And it doesn�t look like it will: the government is likely to announce a raft of spending initiatives in the coming months in an effort to boost the economy (e.g. improving infrastructure like railways). With Japan and soon Britain (probably) announcing such measures, other countries might not be far behind � and that would likely be good for the global economy, at least in the near term.