Move aimed at boosting the economy
July 11, 2016: In order to provide a fillip to the economy post-Brexit, the Bank of England (BoE) is expected to cut interest rates to new historic lows on Thursday. Though a slowdown post-Brexit was more or less predicted, the bank may decide to take some measures to boost the economy.
“The economic outlook has deteriorated and some monetary policy easing will probably be required over the summer,” Mark Carney, the Bank of England governor, had said earlier.
Financial markets have already factored in a 75 per cent chance of interest rates being cut from 0.5 per cent to 0.25 per cent this week — the first rate cut in more than seven years. Rates are not expected to return to their current level for five years.
Carney laid the groundwork for a rate cut a week after the Brexit vote. The pound tumbled to a 31-year low while shares in banks nosedived.
Rate cut by the bank will mark a complete turnaround from the pre-referendum pattern. The rates have been consistent at 0.5% for more than seven years now. Official borrowing costs were last cut in March 2009 when the UK was in recession.