Bank of England Leaves Rate Unchanged

The Bank of England (BoE) is poised to cut rates for the first time since 2009, as Britain’s economy begun to wobble amid recession after votes on leaving the European Union.

While the BoE surprised financial experts by leaving interest rates unchanged last three weeks, the central bank said that policymakers will have their support in any further action in August as the post-referendum uncertainty dragged down the economy.

Thus, growth sees gradual movement, and an eyed industry survey on Wednesday suggests that Britain’s economy begun to shrink at the rapid pace since the last time the BoE cut interest rates.

Several analysts are now expecting the BoE to cut interest rates by at least a quarter percentage point on Thursday to a session-low of 0.25 percent, and it is widely anticipated that its multi-billion program of government bond purchases could resume.

"There is enough evidence on the negative shock to the economy that some easing is justified," Investec economist Philip Shaw said, though he viewed the scale of the slowdown as too unclear for the BoE to buy bonds on top of a rate cut.

An economist at BoE Andy Haldane said he agreed to respond to a slowing growth by using "a sledgehammer to crack a nut", but another economist Kristin Forbes mentioned supporting the rate cut has insufficient evidence.

Given that most businesses and consumer surveys suggests a down trend, it is too early for any definite official data on how results have been weighed down by June 23’s Brexit vote.  

It is likely that the Bank of Japan (BOJ) and the Reserve Bank of Australia will proceed with a rate cut once the BoE cut its Bank Rate to the lowest level in its 322-year history, which both banks have undertaken unusual stimulus last week.

Among the main central banks globally, only the U.S. Federal Reserve has been considering a tighter policy for this year.

However, analysts and former top officials at BoE are in doubts about how positive a rate cut or several quantitative easing will do, considering official interest rates and government borrowing costs are already settling at a near session lows.

European Stocks Higher Ahead Rate Cut Decision

European stocks were broadly higher during the course of Thursday’s session as market players digest financial earnings and are closely watching on the upcoming rate decision of BoE, widely expecting a rate cut to a record low.

The pan-European STOXX 600 rose about 0.42 percent with all major stock exchange turned into positive. Meanwhile, investors are making their hopes up for BoE to cut rates for the first time since 2009 to spur the Britain’s economy, which has struggled since the U.K. voted to leave the European Union.   

However, some investors are also expecting the BoE to resume its quantitative easing program, buying government bonds. Despite an easing measure, questions were raised as to how it will make any difference.  

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