Bank of England set to stick with rate cut signal despite Brexit bounce

thenews 2016.09.15 00:07

The Bank of England is expected to say on Thursday that it will still probably cut interest rates to a fraction above zero later this year, despite signs it overestimated the initial shock to Britain's economy from June's Brexit vote.

The BoE's nine rate-setters probably voted unanimously at their September meeting to keep Bank Rate at 0.25 percent, the lowest level in the BoE's 322-year history, according to a Reuters poll of economists.

The Bank will probably also signal that a further cut is likely the next time it meets, in November, as it to tries to help the economy cope with the referendum decision in June to leave the European Union.

When the BoE stepped in with a stimulus push on Aug. 4, it had little concrete data on the impact of the Brexit vote. But since then signs have grown that the economy, while still heading for a sharp slowdown, weathered the initial shock.

Governor Mark Carney, who has been accused by Brexit supporters of being alarmist with his warnings about the consequences of a "Leave" vote, said earlier this month that growth might slow to around 0.3 percent in the third quarter.

That would be slightly less severe than the 0.1 percent crawl that the BoE had expected but half the pace of growth in the April-June period.

"The UK is far from out of the woods yet," Daniel Vernazza, an economist with UniCredit bank, said. "In particular, surveys suggest businesses are deferring investment."

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