The Bank of England have cut interest rates from 0.5% to 0.25% in an attempt to stimulate the UK economy.
The base rate cut is just one of the measures the Bank of England has taken to try and meet the government’s inflation target of 2%.
The Monetary Policy Committee will also introduce the new Term Funding Scheme which will encourage banks to pass on the interest rate cut to customers.
£60bn of UK government bonds, along with £10bn or corporate bonds will also be purchased taking the total stock of these assets to £435bn.
Bank of England Governor, Mark Carney said,
“The MPC is determined that the stimulus the economy needs does not get diluted as it passes through the financial system.”
“We took these steps because the economic outlook has changed markedly, with the largest revision to our GDP forecast since the MPC was formed almost two decades ago.”
“By acting early and comprehensively, the MPC can reduce uncertainty, bolster confidence, blunt the slowdown, and support the necessary adjustments in the UK economy.”
The forecast for the UK economy by 2017 was also changed by the committee from 2.3% in May to 0.8%.
One reason the committee gives for changing its forecast is the uncertainty over Britain’s future following its decision to leave the EU, it 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”
How Will the Interest Rate Cut Affect You
The Bank of England is determined to make sure the cut on interest rates are passed onto those with a mortgage.
The average mortgage will be £22 per month cheaper, so long as it’s on the Bank of England base rate tracker.
Once again savers are set to lose out, with the average account currently offering 0.65% but that could drop to 0.4%.
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