Interest rates cut plus new stimulus package

Interest rates cut plus new stimulus package


The Bank of England has cut interest rates to a historic low of 0.25% and launched a new package of economic stimulus measures.

The move will be welcomed by construction companies worried by the threat of a post-Brexit vote slowdwon.

A new £70bn bond buying programme will be launched while a new funding scheme will help bankers pass the rate cut on to borrowers.

The Bank said: “Following the United Kingdom’s vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly.”

It is worried about a rise in inflation as sterling devalues against other currencies while GDP growth is predicted to come to a halt this year.

The Bank said: “The cut in Bank Rate will lower borrowing costs for households and businesses.

“However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates.

“In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate.

“This monetary policy action should help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that households and firms benefit from the MPC’s actions.”


Construction Enquirer, Grant Prior, 4th August 2016