Interest rates could be cut as soon as this week to historic low of 0.25 per cent in bid to boost economy

 
Tracey Boles
Bank Of England Governor Mark Carney Holds Financial Stability Report News Conference
Mark Carney (Source: Getty)

THE Bank of England is forecast to cut interest rates as early as this week to ease the strain on the economy in the wake of the referendum.

Investors and economists are expecting a rate cut to a historic low of 0.25 per cent on Thursday when the Bank's Monetary Policy Committee meets.

BoE governor Mark Carney has said that he does not expect to bring in negative interest rates but he could take them down from the current 0.5 per cent to zero and restart the quantitative easing programme, likened to printing money, in a bid to boost the economy.

Signs of a slowdown including plummeting consumer confidence and Brexit jitters hitting the property market hard.

“With the UK economic outlook weakened by the Brexit vote, there can be very little doubt – if any – that the Bank of England will enact some stimulus on Thursday following the July MPC meeting. The only question really seems to be exactly what action will the MPC take?” said Howard Archer, IHS Global Insight's chief UK & European economist.

“A plunge in consumer confidence and evidence of markedly reduced business sentiment since the Brexit vote has enhanced the case for interest rates to be cut from 0.5 per cent to 0.25 per cent as soon as Thursday. To us, there seems little reason to wait on an interest rate cut front.”

Low interest rates may be a boost to borrowers but they hit savers hard as well as annuity rates which have already tumbled since the referendum.

Lower rates and a revival of QE could also weaken the plunging pound further.

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