The Bank of England says it will still probably cut interest rates to a fraction above zero later this year, despite signs it overestimated the initial shock to Britain's economy from June's Brexit vote. David Pollard reports.
The Great British consumer ... a friend to the economy definitely. But seemingly at odds with the Bank of England's Mark Carney. Strong retail sales in August confounding his warnings of post-Brexit vote gloom. And prompting some to ask why he announced such a major stimulus package last month. (SOUNDBITE) (English) BGC PARTNERS, MARKET STRATEGIST, MIKE INGRAM, SAYING: "You had these apocalyptic prognostications of the consequeces, immediate consequeces, of a vote to leave. That, of course, wasn't borne out in the real economy whatsoever." There was no change at its latest meeting - that as expected. But a majority of policymakers signalled a further cut to come, according to the meeting's minutes. Spurring more questions ... (SOUNDBITE) (English) BGC PARTNERS, MARKET STRATEGIST, MIKE INGRAM, SAYING: "I think we are in a situation now where central banks feel they have to be seen to be doing something because there's nothing else out there." In a new Reuters poll, economists see 35 per cent chance of recession in the coming year. That's down from 60 per cent in July. But it's still something of a close call - most expect growth to flatline this quarter. Most also call for fiscal stimulus - to reboot economies where extreme monetary policy measures have not. (SOUNDBITE) (English) BGC PARTNERS, MARKET STRATEGIST, MIKE INGRAM, SAYING: "We've heard Mark Carney say at least for now that he doesn't think we should be going into negative rates .... He does seem to be drawing a line in the sand. You've got the Bank of Japan next week possibly thinking about a reverse operation twist in a belated effort to steepen the yield curve. It all looks a bit desperate, really." A 15 basis points cut is expected in November. That would take UK rates down to just 0.1 per cent. And a new record low could drag sterling down even further - and push up prices on imported goods for Britain - and its shoppers.