Bank of England Reduces Interest Rates by 0.25% to 3.5%
The Bank of England's Monetary Policy Committee voted on 10th July to reduce the Bank's repo rate by 0.25% to 3.50%.
The Bank of England commented:
"The global economic recovery has remained hesitant. Although the preconditions for recovery remain in place, the prospect for external demand for UK output is weaker than previously expected. Output growth in the United Kingdom has recently been below trend. Slower consumer demand and subdued private investment have so far offset the impact of higher public spending. Although RPIX inflation is currently above the 2.5% target, this is the result of temporary factors which are expected to unwind in the coming months. Overall pay growth has been muted so far this year. The fall in the sterling effective exchange rate since the start of this year should help underpin growth, but in recent weeks that fall has been partly reversed, reducing the prospective impact on inflation. Against that background, and given the possibility of subdued economic activity continuing in the near term, the Committee judged that a reduction in official interest rates to 3.50% was necessary in order to keep inflation on track to meet the target in the medium term."
CML Director General Michael Coogan said:
"The fact that the Monetary Policy Committee have today decided to cut interest rates confirms that they do not see the current state of the housing market as a barrier to taking measures to benefit the wider economy. The Bank's forecasts suggest a slowing down in house price growth to zero over the coming year, and although we expect to see positive growth continue, we firmly believe that the housing market is achieving a natural slowdown. So this rate cut is unlikely to further stimulate the demand for mortgages. Lenders will be watching the markets and considering funding issues in deciding how to react to today's rate cut."