MercoPress. South Atlantic News Agency

Bank of England rates remain at record low, but could be further cut

BoE also voted 9-0 to keep the bond-buying program target at 435 billion pounds and to continue with its new plan to buy up to 10 billion pounds of corporate bonds.

The Bank of England said on Thursday it was still likely to cut interest rates to just above zero later this year, even though the initial Brexit hit to Britain's economy would be less severe than it expected only last month. The Bank said its nine rate-setters were unanimous in their decision to keep Bank Rate at its new record low of 0.25%, the lowest in the BoE's 322-year history.

 They also voted 9-0 to keep the Bank's bond-buying program target at 435 billion pounds and to continue with its new plan to buy up to 10 billion pounds worth of corporate bonds.

Two rate-setters who last month opposed the expansion of the government bond buying program said they still did not think it was needed, but voted in line with their colleagues because reversing the decision now would be too disruptive.

Last month the BoE decided to help Britain's economy cope with the shock of the decision to leave the European Union with a stimulus package on a scale not seen since the depths of the global financial crisis.

But since August, a string of indicators has shown a bounce-back from the initial impact of the Brexit vote, surprising the BoE although the economy is on course to slow sharply.

“A number of indicators of near-term economic activity have been somewhat stronger than expected,” the Bank said in minutes of the MPC's September meeting. “The Committee now expect less of a slowing in UK GDP growth in the second half of 2016.”

Central bank staff estimated the economy would grow by 0.3% in the July-September period, better than their previous forecast of a slow crawl of just 0.1% made in August.

However, growth of 0.3% would represent a halving from the second quarter's pace and the Bank reiterated it could well cut its benchmark lending rate further soon.

“The Committee's view of the contours of the economic outlook following the EU referendum had not changed,” the minutes said.

The members of the Monetary Policy Committee said they continued to expect that the uncertainty caused by the vote would drag on the economy as Britain and the EU haggle over the terms of their new relationship which will probably reduce access for British companies to the bloc's single market.

British finance minister Philip Hammond has said he will back up the BoE's monetary stimulus for the economy by slowing the country's push to turn its budget deficit into a surplus and he is expected to announce higher public spending in November.