CPA Canada said 72 per cent of respondents felt the referendum decision would have a negative impact on the global economy, while 40 per cent said they expect the Canadian economy will also be adversely affected.
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Analysts at HSBC are expecting a 25 basis point cut to the bank’s rate, which now stands at 0.50 percent.
Measures to tempt banks to lend at record-low rates, as well as possible purchases of private-sector assets such as corporate bonds, are potentially on the table alongside buying more government debt with freshly created central bank money.
Most Monetary Policy Committee (MPC) members also expected to cut Bank Rate again this year to a rate “close to, but a little above zero”, if the economy performed as poorly as forecast.
The Bank of England has cut interest rates to a record low of 0.25%.
Senior economists believe the Bank is “almost certain” to slash rates to a new historic low in a bid to prevent a recession in the wake of the Brexit vote.
“Given the evidence of a significant shock to confidence, subdued current and expected inflation, and the lags with which monetary policy works, the risks of not easing policy. greatly exceed the risks of stimulating too much”, said Vernazza.
She says that what will really matter is whether the government will also offer a fiscal boost in the autumn.
Policymakers were not completely united on how to respond to the fallout from Brexit.
The Bank’s key rate has been held at 0.5 per cent since March 2009 as Britain struggled to emerge from the 2007-8 financial crash. A bold move would be, for example, to return to bond-buying at the level seen during the financial crisis that is, 375 billion pounds and other efforts to stimulate lending.
The Bank of England’s inflation report, also published on Thursday, is expected to slash its forecast for 2016 economic expansion from 2.3 per cent to less than one per cent – the biggest downgrade since it become independent in 1997. The BOE will be prepared to act through more easing measures over the coming months if it seems necessary. “The falling pound means that inflationary pressures are already building up, and today’s decision will exacerbate them”, he said.
Now that Britain has voted to leave the European Union it looks as though the era of very low savings rates is set to continue for a long while yet. The growth outlook for 2018 was cut to 1.8%. The MPC said the costs of trying to bring it back to its 2% target in the immediate future would exceed the benefit.
However, the cut in the Bank Rate will not necessarily translate into lower mortgage rates for all borrowers.
Eligible institutions will be able to borrow four-year central bank reserves for an initial period of 18 months at rates close to the Bank Rate.
“If the BoE surprises by not only cutting rates by more than 0.25% but by adding additional stimulus, the rand would rally hard and a sustainable break of R13.80 to the dollar is on the cards”.
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Hammond, who replaced George Osborne last month, authorised the bond purchases and the TFS.
