Economists Say BOE Will Make Its First Rate Cuts In Years
This week, the Bank of England will likely make its much-anticipated first interest rate cuts in more than seven years, bringing them to the lowest rate since the bank was founded in 1694.
The nation’s policymakers shocked investors last month when they left rates unchanged. Traders were certain the effects of the UK’s referendum vote would warrant a rate cut. But the Monetary Policy Committee decided to hold off until this month, leaving rates at a record low of 0.5%, where they have been since March 2009 on a supposedly temporary emergency basis.
If the rate cut take places like most economists predict, it will drop from 0.50% to 0.25%, immediately weakening the pound, particularly in relation to the US dollar. This potential cut would bring the BOE into uncharted territory and the lowest rates in BOE's over 300-year history.
Brexit took quite a toll on the global marketplace—trading was sparse and investors and economists alike wondered what long-term effects the vote would have on markets. Though the initial shock didn’t last long, the UK’s economy took the biggest hits. The British pound dropped to a 31-year low and UK Prime Minister David Cameron stepped down following the vote.
"The issue is it's going to take some time before the UK finds its feet,” Georgia State University economist Rajeev Dhawan told Bisnow.