Lenders expected overall demand to increase slightly in Q3, but demand for buy-to-let lending was expected to fall again.
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“In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the Committee expect monetary policy to be loosened in August”, which analysts suggest would mean a lowering of the rate to 0.25%, the statement said.
Eastern Time. Markets have largely priced in a cut of 25 basis points in the benchmark interest rate, to a record low 0.25%.
Sterling soared on the back of interest rates remaining unchanged, gaining almost 2 per cent against the United States dollar, to trade at $1.3375.
Most economists taking part in a Reuters poll had expected the central bank to halve its Bank Rate to 0.25 percent in order to cushion the economy from the shock of the Brexit vote. Berkeley (BKGFY) was up 1.5%, Taylor Wimpey (TWODY) was up 1.4%, and Barratt Developments was up 2%.
Carney had promised within a week of the referendum that “some” monetary policy easing would probably be required “over the summer”, and that a “host of other measures and policies” would be considered in the coming weeks. “If he really wanted to signal a clear and aggressive pre-emptive strike to stave off a drop in consumer confidence, growth forecasts and PMI’s, he’d cut rates down to 0.1%”.
“Markets are continuing to cheer the fact that at least some degree of certainty has returned concerning the United Kingdom government”, said Markus Huber, trader at City of London Markets, as quoted by Reuters.
She added: “With a new prime minister and cabinet in place, political uncertainty has abated and the Bank of England has wisely made a decision to keep its powder dry for now”.
The bank said it was too soon to know the full impact of the Brexit vote – even though the housing market already shows signs of struggling and business confidence has plummeted. The BOE’s next meeting is on August 3-4.
“The exact extent of any additional stimulus would be based on the Committee’s updated forecast”, the Bank said.
“Whatever we are to conclude, today’s MPC minutes are certainly prepping markets for much more than just a Bank rate cut on August 4”, she said. European shares are catching up with global equities that have already erased their post-referendum losses on optimism major central banks will step up stimulus to ward off any potential damage from Brexit.
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The minutes confirmed fears for a hit to house prices from the Brexit vote, with the Bank warning that ” survey data point to a significant weakening in expected activity”. “New buyer enquiries in May were at the lowest level since 2008”.
