BoE: On Brexit hold – Nordea Markets
|Jan von Gerich, analyst at Nordea Markets, points out that the Bank of England (BoE) kept both Bank Rate and the bond purchase programme unchanged in line with their and market’s view.
Key Quotes
“BoE noted that the near-term outlook for global growth had softened since the previous meeting, downside risks to growth have increased, while Brexit uncertainties have intensified considerably.”
“We, however, remain sceptical that a no-deal scenario could lead to a rate hike. Thus, we expect a no-deal scenario would lead to a response somewhat similar to the aftermath of the 2016 referendum (monetary easing), although we admit that the trade-off between inflation and growth is more difficult now, as inflation is currently tracing higher.”
“The Bank of England made significant downward revisions to its forecasts for GDP growth. The 2019 GDP forecast was slashed from 1.7% to 1.2%, but the forecasts for 2021 was actually raised.”
“The inflation forecasts were revised more modestly. The BoE once again emphasized its faith in the tight labour market and the current strong wage growth should lead to higher inflation down the road. The updated forecasts thereby once again indicated that the MPC are wage hawks and would be in hiking mode if not for Brexit.”
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