The Bank of England is mulling whether to cut interest rates for the first time in over seven years to curb economic fallout from Britain’s vote to exit the EU.
The BoE on Thursday concludes its first interest-rate meeting since Britain voted on June 23 to exit the European Union and subsequent comments by governor Mark Carney that “some monetary policy easing will likely be required over the summer”.
Jonathan Loynes, economist at Capital Economics research group, said “given that the biggest near-term threat to the economy is uncertainty and its adverse effects on confidence, an interest rate cut” could help to re-assure households and markets following the referendum result.
While markets are pricing in a cut as early as this week, some analysts believe a drop in the BoE’s main lending rate from 0.50 percent to a new record-low of 0.25 percent or even zero may not now occur until August.
This they say is owing to Theresa May’s quick appointment as prime minister having reduced some of the political uncertainty that has gripped Britain since the shock referendum result.
Whether or not a rate cut occurs Thursday or in August, markets expect that by the end of the British summer the BoE will unveil a fresh means of stimulating the economy, as the government heads into tough negotiations on quitting the EU.