‘Sledgehammer’ rates cut in Bank of England bid to stem slump

Sterling dropped at least 1.4% against the euro yesterday as the Bank of England swung into action against the economic shock from Britain’s vote to leave the EU, cutting interest rates to near nothing and unleashing billions of pounds to cushion the Brexit blow.

In what one bank dubbed a “sledgehammer stimulus”, the Bank of England cut interest rates 25 basis points to 0.25% and said it would buy £60bn (€71.4bn) of government bonds with newly created money over the next six months.

The bank forecasts the economy will stagnate for the rest of 2016 and suffer weak growth next year. Sterling sunk to 84.8p against the euro; it was 76.5p on the eve of the June 23 Brexit referendum.