The Bank of England has cut interest rates to a new record low of 0.25% today, the first rate change since 2009, in a bid to stabilise the economy.
Bank of England
It has also boosted its quantitative easing programme by £60bn to £435bn and will spend £10bn will on corporate bonds.
The Bank of England outlined that the UK’s vote to leave the European Union has hurt the British economy.
“Following the UK’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,” the minutes from the meeting of The Bank of England’s monetary policy committee (MPC) show.
“The fall in sterling is likely to push up on CPI [Consumer Price Index] inflation in the near term, hastening its return to the 2% target and probably causing it to rise above the target in the latter part of the MPC’s forecast period, before the exchange rate effect dissipates thereafter.
“In the real economy, although the weaker medium-term outlook for activity largely reflects a downward revision to the economy’s supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in unemployment.
“Consistent with this, recent surveys of business activity, confidence and optimism suggest that the United Kingdom is likely to see little growth in GDP in the second half of this year.”