Carney set to cut rates today in bid to see off recession
Britain's vote to leave the European Union means the Bank of England will take borrowing costs to a new low this week as it makes a pre-emptive strike to try to ward off a recession and to reassure markets, a Reuters poll found.
Only last week, the median in a Reuters poll predicted the Monetary Policy Committee would hold the Bank Rate at 0.5pc today but the latest survey, taken yesterday, points to a 25 basis point cut.
On Tuesday, Bank Governor Mark Carney gave another hint more stimulus was on the way, saying a hit to Britain's economy from last month's referendum could prompt the bank to act.
"Carney once again signalled that the cank has the tools to respond to economic developments," said James Knightley at ING.
"That tool box looks set to be reopened; we think the BoE will react to downside economic risks generated by Brexit uncertainty."
Thirty-nine of the 60 economists polled by Reuters yesterday said the bank would chop at least 25 basis points from the 0.5pc Bank Rate has sat at since early 2009.
The median forecast was for a cut to 0.25pc, with 35 of 60 saying so; two forecast a 50 basis point cut to zero and another two said 40 basis points to 0.10pc.
Financial markets have almost completely priced in a cut for today.
A July 5 Reuters poll found just 19 of 52 economists predicting any change this week, with the consensus for more easing to come later in the year, yet so much has changed in a very short period of time.
Since the referendum, sterling has sunk 12pc to a 31-year low against the dollar, and will probably fall another 3pc according to that July 5 poll.
The bank will re-start its asset purchases later this year - probably in August - topping up the £375bn programme it wound up in 2012 with another £50bn, the poll found.
Only seven economists who were polled expected an increase in the Bank Rate this week. "In addition to a rate cut in either July or August, we look for the BoE to restart its asset purchase programme in August," said Kallum Pickering at Berenberg.
"With appropriate monetary policy support, the economy could scrape through with only a big dent to growth over the next year or two, rather than a big recession."
There was a 53pc chance of a UK recession in the coming year, a Reuters poll taken on June 24 found. (Reuters)