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Zero interest rates may yet be used to boost UK economy

By Margaret Canning

Published 15/07/2016

PwC NI chief economist Esmond Birnie
PwC NI chief economist Esmond Birnie

Zero interest rates are still a possibility as a tool to bolster the post-Brexit UK economy as "exceptional times require exceptional measures," it's been claimed.

The Bank of England defied predictions by holding interest rates at 0.5%, but signalled action next month.

PwC NI chief economist Esmond Birnie said: "A cut in the Bank's rate to 0.25% or even zero would be exceptional, but some feel exceptional times require exceptional measures."

A slowdown ahead of the EU vote on June 23 "is now compounded by post-Referendum uncertainty and any consequent decrease in business and consumer confidence".

He predicted Northern Ireland was likely to share in any economic slowdown experienced by the UK.

But he added that even in challenging circumstances there are some business opportunities.

"If the pound remains low, that could boost price-sensitive sectors such as tourism, food processing and cross-border shopping.

"Some key Northern Ireland sectors such as aerospace and pharma could also become more competitive, if the pound remains weak compared to the US dollar."

Minutes of the Monetary Policy Committee (MPC) showed that members voted 8-1 to leave rates at the all-time low of 0.5%, where they have been since March 2009.

Danske Bank chief economist Angela McGowan said: "Although there was no change to interest rates just yet, the Governor has signalled that monetary policy will be used to support the economy and the central bank will ensure there is plenty of liquidity in the UK system. Thus an interest rate drop to zero cannot be ruled out in the months ahead."

Belfast Telegraph

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