BoE surprises markets by keeping key interest rate unchanged at 0.5%

I believe the most likely scenario is for Mark Carney to meet the markets’ expectations through cutting rates by 0.25%, while leaving some bullets for August when the inflation report is released.

The Monetary Policy Committee voted 8-1 to leave rates unchanged, however this does not rule out further economic measures at a later stage if the Bank of England determines the economy requires stimulation to ride out any impact that Brexit might have.

A rate cut would be good news for borrowers, but spell further misery for long-suffering savers. He was a senior economist at Brevan Howard Asset Management before joining the committee last September.

Mark Sismey-Durrant, chief executive officer at Hampshire Trust Bank, commented: “While many were expecting interest rates to be cut, it seems the market must continue to wait for the Bank of England to put measures in place to stimulate the United Kingdom economy following the EU Referendum”.

Britain’s central bank had widely been tipped to cut rates for the first time in seven years in its first meeting after the pro-Brexit vote, but instead signalled its intention to sit tight for now.

Second, a possible increase in inflation sparked by the fall in the value of sterling.

It suggests surveys from “contacts of the Bank’s Agents” indicate “some businesses are beginning to delay investment projects and postpone recruitment decisions” and a “significant weakening” in expected housing activity.

With regard to the referendum, the bank said, “Official data on economic activity covering the period since the referendum are not yet available”.

It also said it expected “sizeable falls” in commercial real estate prices in the short term.

Carney has previously suggested he does not favor taking rates below zero, because of the potential impact on banks.

The next meeting is only three weeks away, however, and Carney had also made the point that the two sessions should be seen in conjunction with one another. “In my view… the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer”, he said on June 30.

Philip Shaw, an economist at Investec, said: “The question then has become not if the MPC will ease, but “what, how much and when”.

Speculation has been rife for some days that a cut is on the cards from the already historically-low level of 0.5 per cent, which has been the norm for the past nine years thanks to the financial crisis.

Wall Street futures pointed to US markets adding to their record highs later too, and among commodities Brent oil prices bounced back to $46.50 per barrel after losses of over 4 per cent on Wednesday.