Base rate cut today 'foregone conclusion' says business consultancy

Base rate cut today 'foregone conclusion' says business consultancy

At least one financial data company says a decision by the Bank of England to cut base rate today is "a foregone conclusion" after evidence has appeared that the economy is contracting rapidly.

The Markit purchasing managers' index - a key indicator, well respected by economists - shows that activity in the UK's services sector saw its sharpest fall in seven years, dropping from 52.3 in June to 47.4 in July. 

The BoE is widely expected to reduce rates to a new low of 0.25 per cent.

This follows a firm decision only three weeks ago to keep the rate at its historic level of 0.5 per cent.

In the heady aftermath of the Brexit vote and change of prime minister, it was anticipated last month that the BoE's monetary policy committee would go for a cut - but It was a clear eight to one decision to keep the rate unchanged. 

A reduction now is likely to be widely interpreted by industry commentators as a bid to bolster the housing market against what is expected to be a drop in transactions.

In recent weeks some nerves have settled after the referendum, although a series of estate agencies - notably Countrywide, LSL Property Services, Connells and Foxtons - have all given warnings that transactions may fall back in the autumn as economic uncertainty deters purchasers. 

Even if there is a cut, there are widespread expectations that mainstream mortgage interest rates may not follow suit, at least in the very near future.

* If you want to read more about Brexit and its impact on agency and the wider property industry, see Marc Da Silva's articles on Brexit and the Northern Powerhouseand What will happen to the housing market if Britain leaves the EU?

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