BoE to cut rates in January – Danske Bank
|Analysts from Danske Bank, expect the Bank of England (BoE) to cut interest rates in January to offset slower growth.
Key Quotes:
“Following the dovish policy signal sent by the Bank of England last week, we now expect the Bank of England to deliver a 25bp cut at its next ‘big’ meeting in January 2020, taking the Bank Rate to 0.50%. This forecast does not depend on the election outcome, although we believe a cut would be more likely in the event of a hung parliament than otherwise. The market is pricing in a 33% chance of a cut in January.”
“We believe it is a close call whether there will be another rate cut in the second half of 2020 but this is not yet our base case. Whether or not a cut will come depends on Brexit and whether we are heading for a permanent US-China trade deal ahead of the US presidential election in November 2020 (50% probability of this happening). Given the high uncertainty about predicting the outcome of the upcoming UK election, it is a difficult call to make.”
“Private consumption is still growing at a decent pace and real wage growth is solid. However, recently we have become a bit concerned about the development in the labour market. Despite Brexit uncertainty and the investment recession, companies have continued hiring people, until now. Although the jury is still out, the atest two jobs reports showed falling employment and soft indicators suggest this trend may continue. If this is the beginning of a new trend, this may start a negative downward spiral, which could lead to a more severe economic slowdown. In this case, we believe the Bank of England would be likely to cut the Bank Rate more quickly, down to 0%, and probably restart QE.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.