Investors Should Prepare for Interest Rate Cuts

Gilt yields have turned negative in the UK following a speech from Bank of England Governor Mark Carney hinting at an interest rate cut this summer

Emma Wall 1 July, 2016 | 11:15AM
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This was supposed to be the season savers finally got respite from the seven years of record low interest rates in the UK. Borrowers were poised for the cost of debt to rise, and income investors were looking forward to finally gaining a yield on cash deposits. 

But then we had the Brexit vote – and now all bets are off. Last night, Bank of England Governor Mark Carney sought to ease economic concerns post-Brexit in his second speech since the referendum result was revealed last week. Speaking to business leaders in London, Carney hinted that there could be an interest rate cut this summer, an about-turn from expectations earlier in the year that the UK would raise rates in 2016.

Carney said that uncertainty over the scale of the changes following the Brexit vote “could weigh on our economic prospects for some time”, but that the Bank would not “shirk from its obligations”.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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