In spite of relatively hawkish wording, more rate cuts are on the way.

Key points

  • The majority of the Board finally comes round to the view of the need for monetary policy easing with a real ex-ante rate above 4.0% in a context of a weakening economy and falling inflation
  • Surprisingly, the tone of the statement was broadly unchanged and it remains on the relatively hawkish side
  • In spite of this, and the absence of any (and thus poor and misguiding) forward guidance, this cut should mark the start of an easing cycle
  • We continue to expect an additional 25bp rate cut (to 7.75%) before year-end and 100bp worth of cuts (to 6.75%) by year-end 2020

 

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