The UK interest rates are expected to be slashed down by nearly half come Thursday since their last reduction in March 2009.
BOE expected to Cut UK Interest Rates for the First Time Since 2009
The Bank of England governor, Mark Carney, is expected to make the announcement this Thursday noon. The interest rates will be reduced from 5% to 0.25%. This announcement comes at the heels of Monetary Policy Committee (MPC) vote last month to hold off on all interest rates even though economists predicted an inevitable slashing down in the rates.
While the reduction has not yet been set in stone, there has been growing pressure imposed on the Bank to lower interest rates in view of the recent poor economic statistics.
With the quick decline in various industries including the service oriented markets, factory industry and construction business, most economists have argued that now is the best time to lower rates in order to minimize decline and revamp growth in these industries.
"Since the referendum, the economic data have weakened considerably. There is urgent need for more stimulus with immediate effect," according to chief UK economist at Pantheon Macroeconomics, Samuel Tombs.
According to David Blanchflower, former MPC member and current professor of economics at Dartmouth College, the Bank must, at the very least, cut rates: "If the data turns around, the Bank can reverse the cut. “If they don't act and it turns out they should have, then the situation is much worse."
Given UK recent vote to exit the European Union, a cut in the country’s interest rates could help boost the country’s economy. However, given the numerous uncertainties surrounding UK’s exit from European Union as well as which factors could affect the country’s financial market, it will be a tad difficult for the MPC to decide on the next best step to take.