Bank of England likely to press button on lower rates

Mark Carney and the MPC meet on Thursday

Mark Carney and the MPC meet on Thursday

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The odds have narrowed sharply on the Bank of England (BoE) cutting interest rates this week from their already historic lows, or injecting other stimulus into the slowing economy, following last month’s Brexit vote and its aftermath.

The City expects the Bank either to cut rates by a quarter point to 0.25 per cent, having been at 0.5 per cent since March 2009, revive quantitative easing or extend its Funding for Lending Scheme.

However, most economists believe governor Mark Carney and the rest of the monetary policy committee (MPC), who meet on Thursday, favour spreading any “package” over this month and August.

Howard Archer, chief UK economist at IHS Global Insight, said: “The door to Bank of England action was kicked wide open by Mark Carney stating in a speech at the end of June that in his view the weakened UK economic outlook will likely require some easing of monetary policy over the summer.”

Since the UK’s vote to leave the European Union in the referendum on 23 June, the pound has slumped and a raft of economic data has suggested a sharp economic slowdown or looming recession.

A report out today says business optimism and output have slumped to three-year lows for the second month running under the weight of Brexit concerns.

Accountants BDO’s business trends report revealed that business output, which reflects company orders for the next three months, slipped to 99 last month, compared to 99.7 in May and 100.6 in April.

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