Move surprises many; however, cuts may take place in August
July 15, 2016: In a move that has surprised many, Bank of England (BoE) has kept interest rates unchanged, despite widespread expectations that it was going to cut its benchmark rate in the wake of a June vote in the UK to leave the European Union.
At 0.5%, the rates are at the same level as the past seven years. The rates were last cut in March 2009. The Bank also refused to expand its £375bn quantitative easing scheme by an 8-1 vote. However, it put households on notice that a rate cut is certain if the economic situation failed to improve over the next month. The Monetary Policy Committee (MPC) said that without a return to more normal conditions, “most members of the committee expect monetary policy to be loosened in August”. BOE also expects a fall in commercial property prices in the coming months.
Sterling rose against the dollar immediately after the news of the unchanged rate.
Earlier Mark Carney, governor BOE, had signalled that a rate cut was almost certain. He had also warned of job losses, banks and companies leaving the country, a plummet in the pound, and even a potential descent into recession. Some of those have happened.