The Bank of England hinted last Thursday that there may be reason to cut interest rates again before Christmas time (Financial Adviser Clifton).
In August the Bank of England cut interest rates to 0.25% and unleashed a further £70bn in quantitate easing in conjunction with funding of £100bn for banks. Of the £70bn £10bn was earmarked for corporate bonds and the remaining £60, government debt. The decision was justified by the assumption that there would be a sharp slowdown in economic activity following the Brexit vote (Financial Adviser Clifton).
However, one month later, the minutes from the September report reveal that the monetary policy committee (MPC) had revised their rather gloomy outlook. Owing to strong confidence, export, consumer spending and manufacturing data, the MPC increased their quarterly growth rate 3 fold to 0.3% from the 0.1% forecast last month. Many have called into question the Bank of England’s decision to cut rates and bolster its QE program, stating that it was far too premature given the lack of reliable data available at the time and the likely consequence for savers and pension schemes (Financial Adviser Clifton).
There was no change to interest rates from the September meeting with all 9 MPC members voting to leave the benchmark rate at 0.25%. The Bank went on to say that if the outlook in November is similar to the forecasts in August, then they would cut rates close to zero. Ignoring the current economic figures it concluded ‘the contours of the economic outlook following the EU referendum had not changed.’
Financial Adviser Clifton
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