Advisers expect rates to hit 0 per cent over the next couple of months as the Bank of England seeks to keep the UK economy on track following the vote to leave the European Union.
In a poll carried out by FTAdviser Advantage, only 10 per cent of advisers polled thought there would be no change this year, following comments made by Bank of England governor Mark Carney that rates could drop, maybe even into negative territory.
Some 74 per cent of those polled believed the monetary policy committee (MPC) would reduce rates slightly, either to 0.25 per cent or 0 per cent, but did not feel the cuts would be as deep as some in the markets have feared.
The rate has been at 0.5 per cent for the past nine years, having been cut at the start of the last financial crisis.
On 30 June, Mr Carney told the markets there could be interest rate cuts and further monetary policy stimulus as a result of ongoing uncertainty since the vote to leave the European Union.
He told the markets: “It now seems plausible that uncertainty could remain elevated for some time, with a more persistent drag on activity than we had previously projected.”
After his comment, gilt yields fell, with investors in the UK witnessing the country’s first negative yielding gilt.
The monetary policy committee is expected to make an initial assessment this month (July) and discuss its options in August.
A particular worry has been the effect of the Brexit vote on sterling, which has been hitting 31-year lows since the result of the vote was announced.
The day after the vote (24 June), sterling fell against the US dollar, from $1.50 on 23 June in the evening to below $1.32 by late morning on 24 June, a 31-year low, having starting the day at $1.346.
Adviser Alan Mellor, managing director of Cheshire-based Phillip Bates & Co Financial Services, said: “It is absolutely essential the government and the Bank of England do everything in their power in the coming days and weeks to ensure as much stability as possible.
“My clients are looking for reassurance in the aftermath of such a historic and seismic event.”
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