The Bank
of England has cut base rates to 0.25%, and announced a range of
measures to stimulate growth, but has signaled that rates could be cut
further if the UK economy worsens.
CBI chief economist Rain Newton-Smith said the
combination of a rate cut and more quantitative easing will help restore
confidence in the UK economy.
"It should be a shot-in-the-arm for business and consumer confidence, lowering borrowing costs and keeping liquidity flowing through the economy."
"What's now most important to businesses is that the Government develops a clear plan and timetable for EU negotiations.
"At the same time, it must press ahead with domestic policy priorities, especially infrastructure decisions, which will allow firms to get on with serving their customers and investing for the future."
The banking trade association BBA says the package sends a clear
signal that the Bank of England is taking a "whatever it takes" approach
to stabilising the economy.
Chief economist Dr Rebecca Harding said the measures announced "will provide greater certainty for individuals and businesses so they can plan for the future."
"We always encourage customers to shop around for the best deal for them in this low interest rate environment."
Interest rates have remained consistently low since 2009, creating a
good environment for borrowers, but a tough time for savers.
Dr Adam Marshall, acting director general from the British Chambers of Commerce (BCC) said the Bank's decision reflects an increasingly uncertain outlook for the UK economy.
"As the new government begins to look at our changing relationship with the EU, lower interest rates may give a helpful boost to market confidence, but have little long-term effect on businesses when rates are already so low.
"What businesses want is low, stable interest rates for the foreseeable future, which will enable them to make their own growth and expansion plans with confidence."
"The additional measures, expanding QE, purchasing corporate bonds and the new term funding scheme, go beyond what many expected, but will be welcomed by business."
The BCC says the term-funding scheme will help ensure businesses benefit from cheaper loans so they can invest and grow.
The Monetary Policy Committee (MPC) has indicated that despite the historic low of 0.25%, the base rate could be cut further in the coming months.
Dr Adam Marshall is recommending that instead of implementing further rate cuts, "the MPC should give careful consideration to developing other measures announced to drive longer-term UK business growth."
"This could be through further purchases of business bonds, and expanding the scope of their intervention to include further investments in the UK's ageing infrastructure in key areas such as transport and communications."
The Pensions and Lifetime Savings Association says that the rate cut creates a bleak outlook for those with pension schemes.
Director of external affairs, Graham Vidler said: "While we recognise the need to protect the UK economy, strong consideration needs to be given to the negative impact this will have on the 6,000 private defined benefit pension schemes helping some 11 million savers."
"Given the current economic conditions we are calling on the Pensions Regulator to use its existing powers to take a proportionate and flexible approach to scheme funding in these uncertain times."
Head of retirement savings at Aberdeen Asset Management, Gregg McClymont, says the UK defined benefit schemes have been grappling with historically low gilt yields for some time.
"The double whammy for defined benefit schemes of bigger liabilities as the discount rate falls, and smaller assets as yields are compressed, is a heavy one.
"For defined contribution savers post-Brexit gains in Government bonds work both ways, making it more expensive to buy a pension at retirement, but increasing the value of the pension pot for those lucky enough to be de-risking towards annuities in the glidepath to retirement."
Yael Selfin, head of macroeconomics at KPMG in the UK has said that while these measures will provide the UK economy with short-term relief, the new government needs to provide more substantive support.
He is calling for clearer direction and timing for future trade negotiations as well as measures to improve the UK's poo productivity performance.
"Although improving productivity has posed a challenge for a while, our clients have suggested a range of actions that could better support UK performance," he said.
"These have included improving regional transport links, better broadband coverage and quality, higher education attainment across UK schools, improving labour mobility through better access to housing, as well as increasing spend on R&D."
Mr Selfin added: "The Bank expects further actions to follow including further interest rate cuts taking base rates to just above zero before the end of the year, though Governor Carney ruled out the possibility of rates becoming negative in the UK.
"This, together with some of the other measures announced, should provide some comfort to banks, pension funds and insurers that the Bank of England also has in mind the difficulties they may face in this rate environment."
"It should be a shot-in-the-arm for business and consumer confidence, lowering borrowing costs and keeping liquidity flowing through the economy."
"What's now most important to businesses is that the Government develops a clear plan and timetable for EU negotiations.
"At the same time, it must press ahead with domestic policy priorities, especially infrastructure decisions, which will allow firms to get on with serving their customers and investing for the future."
Chief economist Dr Rebecca Harding said the measures announced "will provide greater certainty for individuals and businesses so they can plan for the future."
"We always encourage customers to shop around for the best deal for them in this low interest rate environment."
Dr Adam Marshall, acting director general from the British Chambers of Commerce (BCC) said the Bank's decision reflects an increasingly uncertain outlook for the UK economy.
"As the new government begins to look at our changing relationship with the EU, lower interest rates may give a helpful boost to market confidence, but have little long-term effect on businesses when rates are already so low.
"What businesses want is low, stable interest rates for the foreseeable future, which will enable them to make their own growth and expansion plans with confidence."
"The additional measures, expanding QE, purchasing corporate bonds and the new term funding scheme, go beyond what many expected, but will be welcomed by business."
The BCC says the term-funding scheme will help ensure businesses benefit from cheaper loans so they can invest and grow.
The Monetary Policy Committee (MPC) has indicated that despite the historic low of 0.25%, the base rate could be cut further in the coming months.
Dr Adam Marshall is recommending that instead of implementing further rate cuts, "the MPC should give careful consideration to developing other measures announced to drive longer-term UK business growth."
"This could be through further purchases of business bonds, and expanding the scope of their intervention to include further investments in the UK's ageing infrastructure in key areas such as transport and communications."
The Pensions and Lifetime Savings Association says that the rate cut creates a bleak outlook for those with pension schemes.
Director of external affairs, Graham Vidler said: "While we recognise the need to protect the UK economy, strong consideration needs to be given to the negative impact this will have on the 6,000 private defined benefit pension schemes helping some 11 million savers."
"Given the current economic conditions we are calling on the Pensions Regulator to use its existing powers to take a proportionate and flexible approach to scheme funding in these uncertain times."
Head of retirement savings at Aberdeen Asset Management, Gregg McClymont, says the UK defined benefit schemes have been grappling with historically low gilt yields for some time.
"The double whammy for defined benefit schemes of bigger liabilities as the discount rate falls, and smaller assets as yields are compressed, is a heavy one.
"For defined contribution savers post-Brexit gains in Government bonds work both ways, making it more expensive to buy a pension at retirement, but increasing the value of the pension pot for those lucky enough to be de-risking towards annuities in the glidepath to retirement."
Yael Selfin, head of macroeconomics at KPMG in the UK has said that while these measures will provide the UK economy with short-term relief, the new government needs to provide more substantive support.
He is calling for clearer direction and timing for future trade negotiations as well as measures to improve the UK's poo productivity performance.
"Although improving productivity has posed a challenge for a while, our clients have suggested a range of actions that could better support UK performance," he said.
"These have included improving regional transport links, better broadband coverage and quality, higher education attainment across UK schools, improving labour mobility through better access to housing, as well as increasing spend on R&D."
Mr Selfin added: "The Bank expects further actions to follow including further interest rate cuts taking base rates to just above zero before the end of the year, though Governor Carney ruled out the possibility of rates becoming negative in the UK.
"This, together with some of the other measures announced, should provide some comfort to banks, pension funds and insurers that the Bank of England also has in mind the difficulties they may face in this rate environment."
No comments:
Post a Comment