By William Schomberg
LONDON (Reuters) - The Bank of England has kept its main interest rate at 0.5 percent for nearly 90 monthly meetings in a row, but that could change next week when it assesses the economic impact of Britain's historic vote to leave the European Union.
Governor Mark Carney has already signaled that the BoE will cut rates below their already record low levels over the summer and possibly resume its 375 billion-pound bond-buying program.
That could cushion some of the hit from the vote, which has opened up the prospect of years of economic uncertainty as Britain reworks its ties with its main trading partners.
Most economists expect the Bank will wait until August, when it will have a better idea of the state of the economy, before it starts to pump more stimulus into the economy, a Reuters poll showed earlier this week.
But many investors are betting on action sooner than that, putting pressure on the Bank to act when it makes its monthly policy announcement for July at 1100 GMT on Thursday.
Jonathan Loynes, an economist with Capital Economics, said nervousness in markets - following the biggest drop by sterling of any of the world's four major currencies since the 1970s - means the BoE will want to avoid delay.
"We think the (Monetary Policy) Committee will recognize the dangers of disappointing market expectations and cut Bank Rate by 0.25 percent, before re-starting its quantitative easing program in August," he said.
A few economists say the Bank will go further on Thursday. Alan Clarke, at Scotiabank, expects rates will be cut to zero. "What is the point of cutting rates by just 25 basis points? This isn't a fine-tuning operation. Why hold back?" he said.
Carney, who warned of the risks of a "material" Brexit hit to the economy before the June 23 referendum, has said the BoE will take an initial view on the impact next week and make a full assessment in August.
He has also signaled his opposition to following the lead of the European Central Bank and the Bank of Japan by cutting rates below zero, something which could hurt the banking industry.
The BoE cut its Bank Rate to 0.5 percent in the depths of the financial crisis in March 2009, when Gordon Brown was still Britain's prime minister and Carney was running the Bank of Canada.
NO HARD DATA
So far, the BoE has scant evidence of the extent of the blow to the economy from Brexit. Surveys and comments from retailers have shown a slide in confidence among consumers who have driven Britain's recovery from the 2007-09 financial crisis.
But hard data covering the post-referendum period is not expected until late July.
At the same time, Carney and his fellow policymakers will have to balance the risk of a recession with the inflationary impact of sterling's slump since the referendum.
Economists say inflation could climb as high as 5 percent over the next two years, more than double the BoE's 2 percent target.
The BoE has other ways of propping up growth beyond cutting rates and reviving its bond-buying program.
Philip Shaw, an economist with Investec, expected the Bank to extend at some point its Funding for Lending Scheme (FLS) which it launched after the financial crisis to encourage banks to lend to businesses and house-buyers.
"Then, depending on the extent of the downturn in the pace of activity, the onus on providing stimulus might move towards fiscal policy during the autumn," Shaw said.
Finance minister George Osborne responded to the Brexit vote by dropping his target of turning Britain's budget deficit into a surplus by 2020 and by saying he wanted to slash the country's corporation tax rate to below 15 percent.
As well as its decision on rates and QE, the BoE will publish details of its July discussions on Thursday. Its next news conference is not due until Aug. 4, when it will update its projections for the economy.
However, Carney is due to speak in parliament on Tuesday, giving him another chance to explain the BoE's next steps. Earlier this week the BoE tweaked capital rules for banks in the hope of encouraging them to lend more.
(Additional reporting by the Reuters polling team; Editing by Hugh Lawson)