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Bank of England set to cut UK interest rates

The Bank of England (BoE) is expected to cut UK interest rates on Thursday, for the first time in seven years. The decision will be made by BoE Governor, Mark Carney, when the monetary policy committee next meets.

Although some economists believe an interest rate cut is premature, most analysts expect the rate to be cut to 0.25% from the current record low of 0.5%, as volatility induced by Brexit continues to plague financial markets.

Andrew Sentance, Senior Economic Adviser at PricewaterhouseCoopers, and a former BoE policy maker, said: “Carney could have said reassuring things without committing himself to enacting monetary policy. He’s got himself into a bit of a bind” [1].

The new low interest rate would be bad news for pensioners and savers, but those on fixed-rate mortgages will see no change to their interest payments.

Anna Bowes, who runs savingschampion.co.uk, said: “Savers really have been the sacrificial lambs of this downturn. While borrowers have benefited from historically low rates, savers have never known it so bad. However, they must not lose hope as there are still providers that want savers’ cash and are willing to pay a competitive return for it” [2].

The BoE will also likely slash the growth forecast of the economy for 2016 to less than 1% from the 2.3% forecast in May, which would be the largest downgrade in the Bank’s forecasts between inflation reports since 1997.

[1] Bloomberg Carney Nears Rate Cut After BOE Detour on Road to Stimulus – Bloomberg.com

[2] Guardian UK interest rates set to be cut by Bank of England on Thursday – Guardian.com