Bank of England expected to keep interest rates at historic lows

The Bank of England meets tomorrow (15 September) to set interest rates after rolling out a comprehensive set of stimulus measures last month, to support the UK economy after the June vote to leave the European Union.

1) Will the Bank of England cut interest rates again this month?

The consensus among economists is that Bank of England governor Mark Carney will hold fire tomorrow, keeping interest rates at 0.25%, after unveiling a serious array of measures last month.

Just four weeks ago the central bank boss halved the rate to 0.25%, a record low and the first cut since 2009, in a bid to boost the UK economy following the June Brexit vote.

He also announced additional measures to stimulate the UK economy, including a £100bn scheme to force banks to pass on the low interest rate to households and businesses.

The Bank will also buy £60bn of UK government bonds and £10bn of corporate bonds.

Carney will want to take stock to allow time for these measures to feed through into the economy.

2) What was the reaction to such radical measures?

Carney faced hostile questioning from the Treasury Select Committee last week that he was too aggressive in supporting the economy after the vote.

But the governor said he was "absolutely serene" about his decision and that BoE took "timely, comprehensive and concrete" action to support the economy.

The UK's services, manufacturing and construction industries have all showed signs of recovery in August after taking a hit in July.

3) Will the Bank of England sit on its hands for the rest of the year?

No. The Bank in August already signalled that rates could go lower if the economy worsens.

Howard Archer, chief UK and European economist at IHS Global Insight, added that Carney could introduce more stimulus measures in November.

Archer said: "Significantly, while the governor observed that there has been a bit more of a bounce back in the latest surveys than expected, he observed that the economy is still seemingly only growing at about half the pace that it was before the EU membership referendum."

Analysts at Capital Economics added that "although the immediate impact of the referendum seems to have been less severe than many were expecting" they went on that "growth still seems to have slowed markedly".

4) What do these low rates mean for savers?

Millions of savers have seen their savings diminish by hundreds of interest rate cuts after the Bank of England's decision to reduce base rates last month, according to new analysis.

The latest round of cuts has sent savings rates tumbling to record lows, with the average easy-access rate falling below 0.5% for the first time, and the average cash Isa rate dropping below 1%.

There were 354 rate cuts across the market in August, and only three increases, according to data firm Moneyfacts.co.uk. In many cases banks went further than simply passing on the quarter-point cut in the base rate.