The Bank of England is expected to cut interest rates and could unveil a new round of stimulus on Thursday, while cutting its economic forecasts for the U.K. weeks after the epoch-making Brexit vote.
Most economists now forecast that the Bank’s rate-setting committee will cut interest rates to a new historic low of 0.25 percent, its first action on the base rate in more than seven years, when it cut to the current rate of 0.5 percent.
After all, last month, the Bank said “most members of the committee expect monetary policy to be loosened in August.”
Many are also now speculating that there could be a new bond-buying program to help stimulate the U.K. economy, after a series of data points suggested that the country had slowed around the time of the historic referendum on European Union membership, which delivered a vote to leave that surprised many.
Attention will also focus on its latest inflation report, which is likely to downgrade the outlook for the post-referendum U.K. Inflation forecasts are set to rise following the notable weakening in sterling.
’50-50 chance of recession’
The National Institute of Economic and Social Research, a U.K. think tank, called for a “sledgehammer” from policymakers on Wednesday, as it warned that there was a 50-50 chance of a U.K. recession in the next 18 months.
However, there are some other investors who believe that BoE would be in a hurry to reduce interest rates, as that might make them look like a loose cannon. The fall in value of GBP during the last month might start giving positive influence to the economy, and the for the change of interest rates they could wait to do that in September.