IFM Correspondent

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.

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IFM Correspondent

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.

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