Bank of England governor Mark Carney has hinted that interest rates could be cut.
Carney (pictured) said that with a sluggish economy, the Monetary Policy Committee (MPC) could act to boost growth.
Carney said: “The economy has been sluggish, slack has been growing, and inflation is below target.
“Much hinges on the speed with which domestic confidence returns.
“As is entirely appropriate, there is a debate at the MPC over the relative merits of near term stimulus to reinforce the expected recovery in UK growth and inflation.
“There are downside risks from global growth and the possibility that uncertainties over future trading relationships could remain entrenched.
“With the relatively limited space to cut bank rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.
“On the other hand, global growth is showing tentative signs of stabilising.
“The global manufacturing PMI has returned to expansionary territory, helping push the composite to a six-month high in December.
“Early indicators, from financial market prices and the limited number of business surveys since the election, suggest that there has been some reduction in Brexit-related and domestic policy uncertainties.
“The labour market remains tight and domestically generated inflation remains generally firm.
“And total monetary policy space is larger than conventional measures would suggest.
“In the coming weeks, the MPC will watch closely surveys of business and consumer confidence (including intelligence from our agents) as well as global developments.”
This comes following the news that Carney will be replaced by Andrew Bailey as Governor of the Bank of England on 16 March.
David Hollingworth, associate director of communications at L&C Mortgages, was unsurprised about news of a possible rate cut.
He added: “The MPC prepares to act either way depending on the situation.
“We’re still in a situation where things are fairly uncertain, less so than a few months ago but it has always been prepared to act either way.
“And this comes as no surprise considering there was a split decision in November and December.
“The official line tends to be it is ready to act either way to help the economy.
“A rate cut has always been a possibility once we exit Europe and it remains a potential course of action if it’s necessary.
“It’s a possibility. What difference that makes to mortgage borrowers I’m not too sure.
“I’m unsure it will dissuade borrowers from taking the fixed rate options now.
“Second guessing what’ll happen with base rates is difficult so with fixed rates so low at the moment I’m not sure people will be drawn to tracker rates even if there’s potential for them to drop.
“If there’s a cut it will sharpen people’s focus of whether they are getting the best deal.”
Payam Azadi, director of Niche Advice, said there were hints of rate cuts after the election.
Azadi said: “They must have seen some signs of the economy slowing down for them to look at rate cuts further.
“It just shows the sluggishness of everything right now.
“I understand why they’re doing it because they feel the economy is sluggish at the moment and needs a boost.
“Anything they can do to help the economy is helpful.
“If rate cuts are passed on by the lenders it could certainly be a boost for new mortgage clients.
“But I’m fearful of artificially keeping rates low for such a long time as it could have other repercussions.”