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Interest rates look “likely” to be slashed this summer to prevent a Brexit -fuelled economic slump, Bank of England governor Mark Carney announced yesterday.

In a sign of desperation, he paved the way for the Bank’ s base rate – already at a record low of 0.5% – to fall even further in an attempt to cushion the blow from the shock vote.

Most experts predict the rate will fall to just 0.25% – but there is an outside chance of it being cut to zero.

In his second crucial speech in less than a week, Mr Carney said: “In my view... the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.”

A rate cut could go some way towards helping prop up businesses and homeowners on base rate mortgage deals, who will both see the amount of interest they pay on loans reduce.

But it would hammer millions of long-suffering savers – including many pensioners on fixed incomes – who have already endured seven years of rock bottom rates following the last financial meltdown.

Pension funds could also see the returns they make on government bonds fall. And a slowdown in the economy is also likely to worsen a ballooning black hole in the final salary pension schemes of many firms.

The Bank’s nine-member Monetary Policy Committee will next meet on July 14 to discuss rates.

However, economists believe any cut will be delayed until August.

The committee could also decide to ramp up quantitative easing – the term used for effectively printing money – to try to boost the economy.

Mr Carney’s comments triggered a surge in share prices, with £37billion added to the value of the UK’s largest listed firms as the FTSE 100 jumped 2.3%, or 144 points.

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The index, which includes many big businesses with overseas operations boosted by the sharp fall in the value of the pound, reached the highest level for nearly a year.

The wider FTSE 250, which covers more UK- focused businesses, rose a more modest 1.7%. But sterling fell more than 1% against the dollar, to $1.32.

It came as David Cameron met 21 of Britain’s top business leaders for an hour in Downing Street as he moved to calm fears over Brexit.

Chiefs of easyJet, BP and Rolls-Royce were among those who urged the “closest possible” trade deal with Brussels after Brexit at the mini-summit joined by Chancellor George Osborne.

The meeting heard a new group of ministers will be set up as soon as next week to calm business chiefs’ fears, led by Business Secretary Sajid Javid.

(Image: Getty)

In his speech, Mr Carney insisted the Bank stood ready to head off a financial crisis, saying lenders were far better prepared than for the banking crisis that erupted in 2008.

But he admitted the vote to leave the European Union poised a major challenge. “The question is not whether the UK will adjust but rather how quickly and how well,” he said.

“Uncertainty over the pace, breadth and scale of these changes could weigh on our economic prospects for some time.”

Mr Carney was forced to defend warnings issued by the Bank – which is independent – about a Leave vote in the run-up. Asked whether he should resign, he said: “It would be irresponsible of me to walk away from my obligations.”

(Image: Reuters)

Economist Howard Archer, at IHS Global Insight, said: “There seems little doubt that part of the Bank of England’s package will be to cut interest rates from 0.5% to 0.25%.

“While there is a possibility that the Bank of England could eventually take interest rates down to 0.00%, we are far from convinced that they would do this and we doubt very much the Bank would take interest rates into negative territory.”

The International Monetary Fund said: “ Brexit has created significant uncertainty and we believe this is likely to dampen growth in the UK, but with global repercussions.” In a plea to the UK and EU ahead of talks, it added: “Decisive politics will make a difference.”

Meanwhile, business magnate George Soros said the result had added to a potential financial crisis “comparable in severity to that of 2007/08”. He added: “This has been unfolding in slow motion, but Brexit has accelerated it.”

Analysis: The zero option would be a sign of desperation

Talk of a rate cut was seen as a joke just three months ago. How times change.

Now, after the Brexit bombshell, zero rates are an outside possibility.

That might sound good if you’ve got a variable rate mortgage, credit card, or other borrowing.

But it’s a double-edged sword and a sign of desperation.

A cut would, in theory, lower borrowing costs for individuals and businesses.

(Image: Mirrorpix)

It’s hoped they would spend the savings, ploughing money back into an economy hit by Brexit fears. But it also means even lower savings rates.

Again, the theory is that savers would spend money rather than squirrel it away earning nothing.

The economic leg-up – and the prospect of billions of pounds being pumped into the financial system – is one reason shares jumped yesterday. The pound fell because a rate cut will mean firms and others with investments in sterling will make less money.

But the Bank of England has limited wriggle room.

In 2007, when the last financial crisis erupted, its base rate stood at 5.75%. Now it is just 0.5%.

The Bank insists it has other weapons in its armoury. These include making £250billion available if banks, fearing another crisis, begin to stop lending to one another.

That would, in turn, push up borrowing costs for households and businesses.