Base Rate cuts threatened by value of the pound
The falling value of the British pound may influence the Bank of England’s decision to implement further cuts to the Base Rate, according to Legal & General.
The insurer revealed that the value of the pound has fallen by 10% over the past year, with the main decline being a drop of 15% against the Euro. James Carrick, spokesperson for L&G Investment Management, said the pound’s decreasing value will provide a stimulus to the economy by making UK exports more price competitive.
He added: “The falling value of our currency will also mean that imports will be more expensive, putting upward pressure on inflation. The Bank of England might find it difficult to strike a balance between moderate growth and stable inflation.
“With this backdrop, the prospects for significant rate cuts in the UK are quite limited in my view.”