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New drop in interest rates expected to help economy

By Holly Williams

Published 11/07/2016

The economy could get a post-Brexit vote boost this week as expectations mount that the Bank of England will cut interest rates to a new historic low.

Bank governor Mark Carney has already signalled that policymakers on the Monetary Policy Committee (MPC) would vote to slash rates over the summer, suggesting a cut in July or August.

Economists at Hargreaves Lansdown said it was "now probable" rates will be cut on Thursday, with financial markets pricing in a reduction from 0.5% to 0.25%.

They said it was possible rates may also be lowered to zero in August as the Bank struggles to bolster flagging growth and contain the fallout of Britain's vote to leave the EU.

This would be good news for borrowers, but further misery for long-suffering savers.

Recent signs for growth have been worrying, with industry surveys for the services sector and the construction industry pointing to a sharp slowdown, with the latter experiencing its worst month in seven years for June.

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