"A majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year."
A majority of members also expect to support a further cut in Bank Rate later this year. The MPC "currently judges this bound to be close to, but a little above, zero".
The package of measures include a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate and for the first time it will purchase up to £10bn of corporate bonds.
The Bank will also expand the asset purchase scheme for UK government bonds by £60 billion, taking the total stock of these asset purchases to £435 billion.
The committee voted unanimously to cut Bank Rate. Eight members supported the introduction of a corporate bond scheme, and six members supported further purchases of UK government bonds.
The MPC said that following the vote to leave the European Union, the outlook for growth in the short to medium term has "weakened markedly".
The Committee said the rate cut would prevent a fall in sterling pushing up on CPI inflation in the near term, causing above-target inflation.
It added that the United Kingdom is likely to see little growth in GDP in the second half of this year.
As interest rates are close to zero, the Bank admits that it will be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates. In order to mitigate this, the MPC is launching a Term Funding Scheme that will provide funding for banks at interest rates close to Bank Rate.
The MPC says this will transfer the reduction in Bank Rate to the real economy to ensure that households and firms benefit from the MPC’s actions.
This marks both a historic low for the base rate, and the first time a rate change has been made by the MPC in over seven years - the last time being in March 2009, when the rate was cut to a record low of 0.5% at the height of the financial crisis.
Bank of England Governor Mark Carney gave clear signs that the BoE would act soon given the impact that the EU referendum has had on the UK economy - several weeks ago, he declared: “In my view, and I am not prejudging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.”
However trader Jordan Hiscott said last month that the Bank should be cutting rates further. He said: “This time last year, many thought 2017 would herald the beginning of a rate rise cycle and a gradual return to normality, yet our decision to leave the EU has left us in a very different place.
“While I understand Mr Carney’s motive, the move is unlikely to have much of an effect on market sentiment as this has already been priced in. If he really wanted to signal a clear and aggressive pre-emptive strike to stave off a drop in consumer confidence, growth forecasts and PMI’s, he’d cut rates down to 0.1%.”
