Bank of England responds to Brexit turmoil

THE Bank of England has rejected a move to cut interest rates from 0.5% to 0.25% in an attempt to stimulate the economy following the UK’s decision to leave the European Union.

The Monetary Policy Committee had been widely expected to make a change but voted 8-1 in favour of retaining the rate, which was last altered in March 2009.

Bank of England governor Mark Carney had previously indicated the MPC would do whatever was necessary in order to support the economy in the wake of the Brexit vote.

Quantative easing  was also retained at £375bn.

The Bank said the committee members made initial assessments of the impact of the vote to leave the European Union on demand, supply and the exchange rate. 

“In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the committee expect monetary policy to be loosened in August,” it said.

“The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.”

Commenting, Rain Newton-Smith, CBI chief economist, said: “While the committee has decided to keep rates on hold, the Governor has signalled that a range of options are being considered to alleviate the economic uncertainty following last month’s referendum.

“Policymakers have several tools at their disposal, and have already taken some measures to pre-emptively ease liquidity bottlenecks and ensure finance continues to flow around the economy.”

“Meanwhile, businesses will be looking for a commitment from the new Government to preserve the openness of our economy in terms of access to markets, skills and trade deals.”