The Bank of England's first rate cut since 2009 looks unlikely to be passed in full to borrowers, according to some. And, as Sam Vadas reports, it may not be a game-changer either.
It's the Bank of England's biggest intervention in Britain's banking market in four years. A quarter-point interest rate cut aimed at easing the economy through a period of uncertainty. There's also a-hundred-billion pounds of new funding for lenders, to help them pass on the rate cut to borrowers. Bank Governor Mark Carney says there's "no excuse" for NOT passing on the cut in full. But Reuters' economics correspondent David Milliken says some companies are reluctant to play along. (SOUNDBITE) (English) DAVID MILLIKEN, REUTERS SENIOR UK ECONOMICS CORRESPONDENT, SAYING: "The challenge for some banks is that they already raise funds at rates cheaper than the Bank of England is offering. So that means, if they do actually cut rates for borrowers, they will end up making less profit or potentially even a loss than they would before. Another factor as well is that the economic outlook is getting a bit darker and so banks may be more concerned that mortgages might turn bad or business loans might turn bad as well." The central bank's moved quickly to try and stimulate the economy, after Britain's decision to quit the EU. But it could take months for competitive forces to kick in, prompting banks to lower their lending rates. (SOUNDBITE) (English) DAVID MILLIKEN, REUTERS SENIOR UK ECONOMICS CORRESPONDENT, SAYING: "I think the Bank will be hoping that there will be an impact fairly quickly but certainly the Bank of England's Deputy Governor, Ben Broadbent, when I was speaking with im last week was clear that this isn't going to be instant, that it is something that will take a bit of time to feed through." Analysts say the Bank's post-Brexit plan is likely to provide no more than a SMALL boost to the economy. But, they say, it won't be a game-changer.