Gold Bar Badge from Bank of England.jpg
Photograph: Photo by Dark Dwarf, used under CC BY-ND

The Bank of England announced the first interest rate cut since 2009 on Thursday, reducing the base lending rate from 0.5 per cent to 0.25 per cent amid warnings of a rise in financial risks since Britain's vote to leave the European Union.

Bank governor Mark Carney said the decision "follows signs of a slowdown in the economy" since the Brexit referendum on June 23, adding that the bank could cut the interest rate again this year.

The central bank's monetary policy committee said it had agreed to the interest-rate cut in a package of measures "designed to provide additional support to growth and to achieve a sustainable return of inflation to the target."

Other measures include using central bank reserves to buy corporate bonds valued at up to 10 billion pounds (13 billion dollars) and expanding an asset purchase scheme for government bonds by 60 billion pounds, it said in a statement.

"The purchase of corporate bonds will support the real economy by directly affecting financing conditions for companies that make a material contribution to UK economic activity," Carney said.

Chancellor of the Exchequer Philip Hammond welcomed the bank's measures and said his government is "prepared to take any necessary steps to support the economy and promote confidence."

"The vote to leave the EU has created a period of uncertainty, which will be followed by a period of adjustment as the shape of our new relationship with the EU becomes clear and the economy responds to that," Hammond said.

"It's right that monetary policy is used to support the economy through this period of adjustment," he said.

The bank said a recent fall in the British pound against the dollar was likely to push up consumer inflation in the near term, forecasting "little growth" in the country's economy for the rest of this year.

It highlighted problems including "a downward revision to the economy's supply capacity," and weak demand leading to spare capacity and an eventual rise in unemployment.

The rate cut was in keeping with most analysts' expectations.

The bank had been expected to cut the rate in mid-July, but it held off after saying markets had initially "functioned well" since the referendum, despite a sharp fall in the currency.

Carney had hinted earlier that interest rates could be cut over the summer and warned Britain to expect long-term uncertainty that could "weigh on our economic prospects for some time" following the Brexit vote.

The bank's financial policy committee had also warned that the fallout from the referendum was likely to increase risks including a potential drop in foreign direct investment, and rises in household debt and unemployment.

Latest news

Danish premier and opposition leader reject EU referendum

Danish Prime Minister Lars Lokke Rasmussen and the leader of the main opposition Social Democrats both reject staging a referendum on the country's membership of the European Union as suggested by eurosceptics.

French PM slams "irresponsible" Fillon over "near-civil war" comment

French Prime Minister Bernard Cazeneuve hit back Monday at conservative presidential candidate Francois Fillon, accusing him of being "irresponsible" for saying the race was taking place in a climate of "near-civil war."

Serbia opens two more policy areas in its EU accession talks

Serbia on Monday opened two new policy areas in its EU entry talks, thus bringing the number of opened policy areas to eight.

EC: Economic sentiment for Croatia deteriorates in February

The Economic Sentiment Indicator (ESI), a composite indicator made up of five sectoral confidence indicators, deteriorated for Croatia in February with the subdued confidence of companies from the services and retail sectors having a higher weight than improving consumers' confidence, according to a report released by the European Commission on Monday.

Frankfurt, London exchange operators' stock fall on merger doubts

Shares in the operators of the London Stock Exchange (LSE) and the Deutsche Boerse fell sharply on Monday after the LSE threw fresh doubts on their planned 29-billion-euro (30.1-billion-dollar) merger to forge Europe's biggest exchange.

ICJ asks Bosnia's leadership to state its position on review request

The State Presidency of Bosnia and Herzegovina will have to make a clear statement as to whether it supports the request for a review of the International Court of Justice (ICJ) genocide ruling against Serbia, the Croat member of the country's three-member presidency, Dragan Covic, said on Monday.

White Helmets, grateful for Oscar nod, hope for peace in Syria

Members of the Syria Civil Defence group, a neutral team of some 3,000 volunteers providing aid to Syria's rebel-held areas, expressed joy on Monday that a film documenting their work won an Oscar for best short documentary.

Arson attack at French cultural institute in Athens

Unknown assailants have carried out an arson attack on the French cultural institute in Athens, the fire brigade and police reported on Monday.

INA Group posts core business profit of HRK 607 mn

The INA oil and gas group made positive results in 2016, with profit from operations reaching HRK 607 million, compared to a HRK 1.34 billion loss for 2015, the Zagreb-headquartered group stated in a consolidated financial report issued on Monday.

Report: Former Croatian football star Cvetkovic found dead

The former Yugolsavia international and Bundesliga defender Zvezdan Cvetkovic has died, the Croatian state broadcaster HRT reported Monday.

Youth who posted anti-Serb stickers in Vukovar placed in custody

Following a police investigation, a 19-year-old youth from the eastern town of Vukovar, suspected of posting anti-Serb stickers on bus stops along the town's Trpinjska Street, has been placed in custody on the suspicion of inciting violence and hatred, the county police department said on Monday.

US strongly condemns neo-Nazi march in Zagreb

The US Embassy in Zagreb on Monday strongly condemned neo-Nazi and pro-Ustasha views expressed during a demonstration by several dozen people, organised by the non-parliamentary far-right Autochthonous Croatian Party of Rights (A-HSP) in Zagreb on Sunday.