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.
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Sterling plunged more than 13% against the dollar in the days after the referendum and trillions of dollars were erased from stock markets globally.
Carney has expressed opposition to following the lead of the European Central Bank and the Bank of Japan by cutting rates below zero.
Savers may get an even worse deal than the sub 0.5 per cent rates offered by many accounts at the moment, though banks may hesitate before stripping any more interest from accounts, because rates are already so low.
The British Pound may well continue its recent recovery against the U.S. Dollar, at least to the $1.35 area.
“The lack of clear direction is more likely to add to economic uncertainty and therefore be detrimental to demand and the economy”, said Angus Armstrong, the director of macroeconomics at the National Institute of Economic and Social Research.
Governor Mark Carney said two weeks ago that he expected the BoE to give the economy more help over the summer.
But the minutes of the MPC meeting showed the economy had been resilient in the run-up to the vote, with the Bank now expecting second-quarter growth to pick up to around 0.5%, from 0.4% in the previous three months.
He said an initial assessment would be published this week, while a full assessment and new forecast will be published with the August inflation report.
The minutes of the meeting suggested that next month rates could be cut or the quantitative easing programme restarted.
Philadelphia Fed President Patrick Marker said late on Wednesday that the central bank will likely opt for a “fairly shallow” series of US interest rate hikes, and that he wants to “let it play out a bit” before backing a policy tightening.
Commenting, Darren Ruane, head of fixed interest at Investec Wealth & Investment, said: “It is likely that markets will comprehensively price in the likelihood of a rate reduction in August”.
The interest rate has not moved since March 2009.
The BoE’s minutes stated that survey data since the referendum result “suggest that some businesses are beginning to delay investment projects and postpone recruitment decisions”, while housing market activity is set for “significant weakening”.
Returns on United Kingdom government bond yields rose sharply, with the 10-year yield rising about four basis points to 0.815% after the decision, before easing back to 0.8%.
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The committee still expects the referendum to have a significantly lower path for growth and higher path for inflation following the referendum result.
