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Could interest rates fall further?

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01/07/2016
The Bank of England has hinted that its Base Rate may be cut in the coming months
Could interest rates fall further?

Since the result of the EU Referendum there has been speculation that interest rates in the UK could be cut to stimulate the economy.

And yesterday Governor of the Bank of England Mark Carney made it clear that this was something that he considers likely in the coming few months.

In a speech to business leaders in London he said: “In my view, and I am not prejudging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.

“The committee will make an initial assessment on 14 July and a full assessment complete with a new forecast will follow in the August inflation report. In August, we will also discuss further the range of instruments at our disposal.”

Experts have suggested that a 0.25% rate cut is now on the cards for August, which would be the first change to Base Rate in over seven years.

Recession in the wings?

Before the Brexit result Carney had stated that a leave result could “materially alter the outlook for growth and inflation”.

But he tried to reassure the audience yesterday that there is a clear plan in place to deal with the fallout of the referendum result and that the UK economy was extremely flexible. He said: “The Bank of England has a plan to achieve our objectives and by doing so support growth, jobs and wages during a time of considerable uncertainty.”

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