“But today the pound recovered some of the lost ground after the Bank of England’s surprise decision to hold off cutting United Kingdom interest rates”.
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Most policymakers wanted to wait until the Bank’s quarterly forecasts on August 4 before taking further action as banks and financial markets have also held up surprisingly well since the vote.
The Bank of England kept interest rates on hold and refrained from injecting more money into the economy, despite concerns over the economic impact of Britain’s decision to leave the European Union. There was only one dissenter among the nine members of the monetary policy committee.
“We are pleased to see that with this decision members of the committee expect the economy to regain stability after the Brexit vote turmoil”.
Commentators are now suggesting that the rate will be cut to 0.25% in August.
Philadelphia Fed president Patrick Marker said on Wednesday the U.S. central bank would likely opt for a “fairly shallow” series of United States interest rate rise and that he wanted to “let it play out a bit” before backing tighter policy.
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.
Economists had mostly expected a halving of Bank Rate to 0.25 percent on Thursday, to be followed by a revival of the Bank’s 375 billion pound bond-buying programme at its next meeting on August 4, according to a Reuters poll.
Mr Carney was due to meet new Finance Minister Philip Hammond soon. However, Threadneedle Street officials hinted more stimulus could be on its way next month, possibly as a “package of measures”.
They include rate cuts; reviving the BOE’s bond-buying program and extending purchases to corporate debt and other assets; and boosting the supply of credit for households and businesses by offering banks ultracheap loans through its funding-for-lending program.
The BOE will publish its latest forecasts for Britain’s growth and inflation in its quarterly inflation report alongside its next policy decision on August 4.
Initial reports suggest economic activity is likely to weaken in the near term, the minutes said.
Instead, Carney announced last week that the BoE had made a decision to cut banks’ additional capital buffer requirements in order to free up capital and boost lending to households and companies.
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Data released early on Thursday showed interest among buyers in Britain’s housing market diminished to its lowest level since mid-2008, as the global financial crisis was deepening, adding to early signs of the Brexit hit to the economy.
