The interest rate cut was expected. This is the Bank of England’s attempts to curb the negative economic effects of the UK’s decision to sign the country out of the EU (Brexit).
This is the first interest rate change since March 2009. During the global financial crisis last year lowered Bank of England policy rate – the deposit rate from the central bank – from 5 percent to 0.5 percent within six months.
the central bank also decided to buy government debt (government bonds) for 60 billion pounds (680 billion. NOK) in an attempt to curb Brexit-effects.
in a statement after the monetary policy meeting writes Bank of England that growth in the UK economy is expected to stagnate rest of the year and become weak throughout next year.
Waiting another rate cut
Thursday’s rate cut to 0.25 percent is also historic. Never before in the British central bank 322-year history, interest rates have been so low, writes Reuters.
Bank of England is the world’s second oldest central bank, created in 1694 (Sveriges Riksbank was established in 1668).
Several analysts believe the bank of England may come with a further interest rate cut to 0.15 per cent or 0.1 per cent later this year, most likely at the monetary policy meeting in November.
Dissension in interest Committee
Key persons at the Bank of England revealed earlier this summer that it ruler shared perceptions of the need for rate cuts.
chief economist Andy Haldane said he is willing to respond to the weak economic growth by using “a sledgehammer to crack a nut.”
professor Kristin Forbes, a member of the interest rate committee, said however that she has not seen enough evidence to support a rate cut. Interest Committee then chose also to keep interest rates unchanged at its meeting three weeks ago.
Since then, the central bank received several messages confirming that the outcome of Brexit referendum June 23 frames growth in the UK economy.
controversial nuclear power plants increases uncertainty
the new government’s decision to postpone the approval of building a controversial nuclear plant in southwest England amplifies the uncertainty that has arisen about the economy.
Prime Minister Theresa May seized personal insights with the rationale of the new ministers need more time to evaluate the project.
Just hours before a deal with a French and a Chinese company to build nuclear power plant would be signed last Friday, came stop order from the Prime Minister residence 10 Downing Street in London.
the surprising decision joins the range of uncertainties about the evolution of the British economy after Brexit referendum on 23 June (referendum that gave majority support for withdrawal of EU).
can scare foreigners
foreigners may be frightened to invest in the UK, warns analysts in financial markets, writes Reuters.
They also point out that it can be much harder for Britain to negotiate trade agreements with China and an agreement with the EU on market access in the continent if the nuclear plant shelved.
Large Bank removes 3000 jobs after Brexit
Currently, the official reactions in Beijing and Paris subdued. Both the Chinese and the French understand that the fresh prime minister and her government needs more time to settle into development plans.
Court had into the leadership battle in the LabourConflicting messages
Pessimism has taken hold in some business sectors. Wednesday came an important indicator of the mood of private companies in the service sector – ranging from banks to restaurants. Not since April 2009 have an index that measures purchasing managers’ assessments of the economic outlook in this industry, have been lower.
Hydro reduces growth prospects
The same day let think tank and research company National Institute of Economic and Social Research makes projections. British economy going slip into a new decline in the current quarter and second half of the year.
The International Monetary Fund (IMF) downgraded earlier this summer its estimates for growth in the UK economy by 0.2 percentage points to 1 , 7 percent this year and 0.9 percentage points to 1.3 percent next year.
EU with a clear message: the British can not just pick the parts they want
Britain has also fared better than the euro in EU financial crisis. British economy grew 0.6 percent in Q2 against 0.3 percent in the euro area. On an annual basis, growth in the UK in Q1 of 2 percent compared with 1.7 percent in the euro area.
May wary of nuclear reactors
The construction of two new nuclear reactors at nuclear power plants Hinkley in Somerset on southwest coast of England has long been disputed, both in the UK and France.
the state-controlled EDF (Électricité de France) will own 66.5 percent and the Chinese nuclear company CGN (China General Nuclear Power) 33, 5 percent in Hinkley Point C as the new reactors called.
the development of new nuclear reactors is estimated to cost 18 billion pounds (about 200 billion. NOK) as the French and the Chinese will finance. But the operation is totally dependent on British subsidies.
Depending on large subsidies
In the agreements are ready to be signed, the British government pledged to buy power from the new nuclear power plants for 35 years at a fixed minimum price that is twice as high as the current market price.
the new reactors in Somerset is scheduled to be commissioned in 2025. With full capacity, the new nuclear power plant stand for 7 percent of power supply in the country when older nuclear power plants and coal power plants will be phased out by 2025.
the development of this first nuclear power plant in 30 years – with Chinese and French technology and financing – was a prestige project for the previous Prime Minister David Cameron and finance Minister his, George Osborne writes the British press.
the Chinese can turn the power
Prime Minister Mays reason for postponing the final approval of the new conservative government needs more time to assess the project.
as Interior Minister Cameron government was may skeptical about the whole project, both to the safety of the plant and the French technology has not been tested on a large scale, and that the Chinese can secure a key position in the British power in many decades.
Also in France, Hinkley project disputed. One director resigned when the board of EDF last week approved to participate in development by 10 to 7 votes. One of the board members resigned.
Meanwhile, trade unions in EDF sued the company in an attempt to halt the French participation. They fear that the profitability of the whole project is so uncertain that it puts EDF’s economy at risk.
A court in Paris will Friday take a position on this requirement.
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