Summary

  • Bank of England cuts interest rates to 0.25%

  • FTSE closes up by 1.59% in London

  • Pound struggles, losing 1.4% against the dollar

  • Carney warns banks must pass on rate cut

  • Bank announces two new stimulus schemes

  • Bank expects no growth in second half of 2016

  1. 'Improved the picture'published at 12:54

    Mark Carney says: "If we hadn't taken the steps we have today, we expect output would be lower, unemployment would be higher. By taking the actions we have today we have improved the economic picture for the UK."

  2. Floating mortgages to benefit?published at 12:52 British Summer Time 4 August 2016

    Our business presenter tweets:

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  3. Passing on the cutspublished at 12:48

    Mark Carney says the MPC recognises that when interest rates are very low, cuts may not be passed on to mortgage holders, for example.

    Indeed, overseas there has been evidence of household borrowing rates increasing.

    But the Governor said that the raft of new measures were an attempt to ensure the impact of the cut is not diluted.

    The Term Funding Scheme is a pure monetary policy instrument that is likely to be more stimulative that the previous Funding for Lending scheme. It charges a penalty rate if banks do not lend.

  4. Jobs growth to stallpublished at 12:46

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  5. Further cut?published at 12:44

    Mark CarneyImage source, Getty Images

    Mark Carney warns: "If the incoming data proved broadly consistent with the August Inflation Report forecast, a majority of MPC members would anticipate a further cut in bank rate... at one of the meetings during the course of this year."

  6. Boost for business?published at 12:40 British Summer Time 4 August 2016

    Quote Message

    Whilst the Brexit vote hasn’t started the economic Armageddon that some predicted there is still sufficient uncertainty in the UK outlook to warrant this cut by the Bank of England. Lower interest rates will be good news for our struggling manufacturing sector as it will make British exports more attractive. The MPC has made the right move. We now need a concerted effort from government to lay the foundations for future growth.That means taking advantage of cheap borrowing costs to invest in UK infrastructure, encouraging prosperity across the regions and improving productivity.

    Peter Hemington, Head of corporate finance at BDO

  7. Growth to slidepublished at 12:38 British Summer Time 4 August 2016

    Mr Carney says GDP growth is expected to be 2.5% lower over the next two years than the Bank had expected in May.

    Unemployment will rise from 4.9% to 5.5% over next two years, while CPI inflation will reach 2.4% by this time in 2018.

  8. 'Exceptional package'published at 12:37 British Summer Time 4 August 2016

    Our business reporter at the Carney conference tweets:

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  9. 'Conservative' forecastspublished at 12:36 British Summer Time 4 August 2016

    Somewhat surprisingly, Mr Carney says the MPC has been "conservative" in its revised forecasts.

    The "9% depreciation of sterling will boost exports and weigh on imports", he adds.

    The MPC expects several factors to weigh on investment, including "heightened uncertainty - higher cost of capital".

  10. Carney commentspublished at 12:34 British Summer Time 4 August 2016

    Mark Carney says that "monetary policy can support the necessary adjustments" in the UK economy.

    The revisions to the MPC's forecasts are the largest since the body was established two decades ago.

  11. Briefing beginspublished at 12:31

    Mark Carney has begun his press conference. Talking of Brexit, he says: "The UK can handle change, it has one of the most flexible economies in the world."

  12. Stock market surgespublished at 12:25 British Summer Time 4 August 2016

    The FTSE 100 has bounced 1.2% higher to 6,714 points, while the FTSE 250 is almost 1% higher at 17,158 points in the wake of the Bank of England action.

  13. More in the arsenal yet...published at 12:20

    Resolution Group's Duncan Weldon tweets:

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  14. Super Thursday?published at 12:17 British Summer Time 4 August 2016

    Our business presenter detects some hyperbole in a Bank of England tweet...

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  15. Savers hitpublished at 12:17 British Summer Time 4 August 2016

    Personal finance correspondent Kevin Peachey looks at the impact of the rate cut on both savers - and borrowers:

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  16. Hammond respondspublished at 12:16 British Summer Time 4 August 2016

    Chancellor Philip Hammond said he welcomed the Monetary Policy Committee's decision. 

    "The vote to leave the EU has created a period of uncertainty, which will be followed by a period of adjustment as the shape of our new relationship with the EU becomes clear and the economy responds to that," he said.

    "It's right that monetary policy is used to support the economy through this period of adjustment. That's why I have authorised the Governor's request for an increase in asset purchases and a new lending scheme to support the economy, helping ensure that the benefit of low interest rates is passed on by the banks to households and businesses."  

  17. Growth forecast steady - but inflation to jumppublished at 12:13 British Summer Time 4 August 2016

    The Bank has left its forecast for growth this year steady at 2% as the economy expanded faster in the first half of 2016 than it had expected in May. But 2017 brings a sharp downgrade to growth of just 0.8% from a previous estimate of 2.3% - the biggest downgrade in growth from one Inflation Report to the next, exceeding what was seen in the financial crisis. The growth outlook for 2018 was cut to 1.8%. 

    The Bank also revised up its inflation forecasts sharply, due to the big fall in sterling since the financial crisis, predicting it will hit 2.4% in 2018 and 2019. 

    The MPC said the costs of trying to bring it back to its 2% target in the immediate future would exceed the benefit. 

  18. Pound fallspublished at 12:10 British Summer Time 4 August 2016
    Breaking

    CashImage source, Getty Images

    The pound has fallen more than 1% against the dollar to $1.32 following the Bank of England's announcement of a rate cut and renewed quantitative easing.

  19. Sterling watchpublished at 12:09 British Summer Time 4 August 2016

    Bloomberg's Peter Hoskins has also been watching the pound...

  20. Sterling downpublished at 12:08 British Summer Time 4 August 2016

    Wall Street Journal market reporter tweets: