Newspaper article International New York Times

Bank of England Cuts Interest Rate to Historic Low

Newspaper article International New York Times

Bank of England Cuts Interest Rate to Historic Low

Article excerpt

The central bank's Monetary Policy Committee lowered its benchmark interest rate to 0.25 percent, the lowest level in the bank's 322-year history.

The Bank of England has cut its main interest rate to its lowest point ever and expanded other measures to bolster Britain's economy over concern that the country's decision to leave the European Union could weigh on growth.

The move on Thursday came at a time of widespread uncertainty about the longer-term impact of the vote to leave the bloc, known as Brexit. It is unclear what Britain's future trading relationship will be with the European Union, and crucially, how much access London's prized financial services industry will have to the Continent. The referendum also unleashed a summer of political turmoil that led to a new government and to questions about the new leadership's economic policies.

The short-term impact, however, has been largely negative. In the weeks since the vote, the pound has fallen sharply, and stocks in a number of sectors, including banking and construction, have been under pressure. Several real estate funds suspended withdrawals as investors tried to pull out their cash, fearing a slowdown in the British property market.

Surveys in recent weeks also indicated that consumer confidence, services output and purchasing-manager sentiment had plummeted. The International Monetary Fund has cut its growth forecast for Britain's economy, which had been one of the region's strongest since the financial crisis.

"There is a clear case for stimulus, and stimulus now, in order to be there when the economy really needs it -- to have an effect when the economy really needs it," Mark J. Carney, the bank's governor, said at a news conference on Thursday.

The central bank's Monetary Policy Committee voted unanimously to lower its benchmark interest rate to 0.25 percent, the lowest level in the bank's 322 years. The rate had been at 0.5 percent since March 2009.

Mr. Carney also signaled on Thursday that the committee could cut rates further this year, but he ruled out the possibility of negative interest rates. The committee's next meeting is set for November.

The bank also said that it would introduce a series of additional measures to support the economy, predicting that there would be little growth in the second half of this year and that economic growth would decline sharply next year compared with its earlier forecast for 2017.

"This is a timely, coherent and comprehensive package of measures," Mr. Carney said. "It is appropriately sized given the scale of the shock, the uncertainties about the degree of the adjustment and the relatively limited data."

Those measures included increasing the size of a bond-buying program, part of a policy known as quantitative easing, which is intended to cut market interest rates and stimulate the economy. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.