Bank of England to cut rates on Thursday to ward off recession: Reuters poll

Wed Jul 13, 2016 9:09am EDT
 
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By Jonathan Cable

LONDON (Reuters) - Britain's vote to leave the European Union means the Bank of England will take borrowing costs to a new low this week as it makes a pre-emptive strike to try to ward off a recession and to reassure markets, a Reuters poll found.

Only last week, the median in a Reuters poll predicted the Monetary Policy Committee would hold Bank Rate at 0.5 percent on Thursday but the latest survey taken on Wednesday points to a 25 basis point cut.

On Tuesday, Bank Governor Mark Carney gave another hint more stimulus was on the way, saying a hit to Britain's economy from last month's referendum could prompt the Bank to act.

"Carney once again signaled that the Bank has the tools to respond to economic developments," said James Knightley at ING.

"That tool box looks set to be re-opened tomorrow; we think the BoE will react to downside economic risks generated by Brexit uncertainty."

Thirty-nine of the 60 economists polled by Reuters on Wednesday said the BoE would chop at least 25 basis points from the 0.5 percent Bank Rate has sat at since early 2009 on Thursday.

The median forecast was for a cut to 0.25 percent, with 35 of 60 saying so; two forecast a 50 basis point cut to zero and another two said 40 basis points to 0.10 percent.

Financial markets have almost completely priced in a cut on Thursday.   Continued...

 
A man and woman use their mobile phones as commuters walk past the columns of the Bank of England in the City of London, July 3, 2012.  REUTERS/Andrew Winning/File Photo