Interest rates could be cut next month in response to Brexit, according to Bank of England governor Mark Carney. A deteriorating economic outlook means action from the Bank is likely during the summer, Mr Carney said. The Bank rate – currently at a record low of 0.5% – is the Bank’s chief weapon.
Mr Carney was speaking to business leaders in his second speech since the UK’s vote to leave the EU. “In my view, and I am not pre-judging the views of the other independent Monetary Policy Committee (MPC) members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer,” he is to say.
This points to the likelihood of a cut to interest rates from their already record low. It also creates the distinct possibility of further quantitative easing over the summer. The MPC next meets in the middle of July and then again in August.
The Bank’s predictions are that growth will be slower than previously expected next year, at 1.6%. Until now the Bank had been predicting 2.3%, and that predicted slowdown was based on a vote to remain in the EU. “It now seems plausible that uncertainty could remain elevated for some time, with a more persistent drag on activity than we had previously projected,” he said.