LONDON: The Bank of England has left its main interest rate at 0.25% but says another cut is still a possibility. The decision of the Monetary Policy Committee (MPC) to leave rates at their new, historically low, level was no surprise.
Last month the Bank halved its bank rate from 0.5% as it tried to ensure the stability of the UK’s banking system in the aftermath of the June Brexit referendum vote. That was the first rate cut since 2009. But the Bank said again that it might cut rates further in the coming months, even though the immediate economic after-shock of the Brexit vote now appears to be weaker than first thought. “A number of indicators of near-term economic activity have been somewhat stronger than expected,” the Bank said in the minutes of its latest MPC meeting.
It added that if its economic forecasts in November were similar to those it had formulated in August, then “a majority of members expected to support a further cut in bank rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year.”
The Bank noted that a variety of economic indicators have suggested that the UK economy has shrugged off the post-referendum surprise in the short-term. As a result, the Bank is not as gloomy about the short-term state of the economy as it was a month ago. But it said that it still expects the pace of economic activity in the July-September period to have halved from the growth rate recorded earlier in the year.
