Bank of England could 'absolutely cut rates again' this year

The Bank of England (BoE) could cut interest rates even further this year if it deems necessary to do so, the Bank's deputy governor, Ben Broadbent, said on Friday (5 August).

On Thursday, as was widely expected, Britain's central bank cut interest rates to a historic low of 0.25% in response to worsening survey data following the country's decision to leave the European Union.

However, speaking to the BBC Radio 4's Today Programme, Broadbent refused to rule out the possibility of bringing the benchmark interest rate even lower in the future. The BoE deputy governor said the bank would "absolutely" consider further rate cuts in the remainder of the year if the economic environment required it to do so.

Broadbent's words echoed Mark Carney's stance, after the BoE Governor admitted on Thursday that monetary policy might not be enough to prevent Britain's economy from slowing down even further.

The bank's deputy governor told the BBC the bank had acted after surveys showed a marked decline in economic confidence, employment and housing market in the weeks following Britain's vote in favour of leaving the EU in June.

On Thursday, the BoE also unveiled a new stimulus package, indicating it will boost its quantitative easing programme by another £60bn ($70bn), bringing the tally up to £435bn. Carney described the measures as "timely, coherent and comprehensive" and Broadbent expressed mild optimism over the package.

"I'm pretty confident it will have some effect [...] it is a substantial, coherent package [...] we have already seen mortgage rates fall," he said.

The BoE's decision was not met with widespread approval by City analysts.

Andrew Sentance, senior economic adviser at PwC, said there was little the BoE could do to offset the shock to the economy.

"This cut in interest rates was widely expected, but it is really a token gesture which is unlikely to help the economy much in the current situation," he said.

"Savings rates are already near-zero and borrowing costs for business and homeowners are extremely low. The pound could well weaken further, adding to inflation and business costs."

Ben Brettell, senior economist at Hargreaves Lansdown, was somewhat more optimistic, although he warned the new measures were did not guarantee success.

"The bank went further than markets anticipated, and as a result sterling immediately fell by more than a cent and a half against both the dollar and the euro," he said. "Whether these measures are appropriate, only time will tell."

Meanwhile, Michelle McGrade, chief investment officer of TD Direct Investing, described the rate cut as a step in the wrong direction if "instilling confidence in the economy and markets" was the central bank's objective.

"We have seen in the major countries, and especially in Japan, that very low and in some cases negative interest rates have not had the desired effect in terms of stimulating economies," she said.