"If - and it's a very big if - the British Prime Minister can defy the odds and persuade parliament to approve her Brexit deal in December, then we think this would keep the Bank on-track to hike rates in May 2019, potentially followed by a second increase in November," explain ING analysts.
"However, it looks increasingly likely that Parliament will reject the deal. This could open the door to a snap election (or maybe a referendum), although this seems a tall order given that it would require a number of Conservative MPs to back it."
"Without an election or referendum, then avoiding 'no deal' will boil down to whether Prime Minister can find support for her deal second time around."
"Our base case is still that a fudge can be found that passes through Parliament and avoids 'no deal', although this might not happen until much closer to the EU exit date in March. This means that businesses and consumers are likely to grow more cautious over the winter. Again, this would push the date of the next rate hike further back into next year to let the dust settle."
"Finally, if the UK does fall off the cliff edge, then BoE policymakers have suggested rates could go in either direction. However, any supply-side shock would likely be coupled with a sharp hit to confidence, so we suspect the Bank will focus on growth and look through any currency-induced inflation spikes. We think policy easing would be likely, although we get the sense that policymakers may wait a little longer than they did in 2016 before acting, to get more evidence on the true economic picture."
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