UK: Keep calm and cut rates – Rabobank

There is a clear coordination of the BoE’s actions with those of HM Treasury, which is yet another important signal that we’re seeing a paradigm shift, according to economists at Rabobank.

Key quotes

“In quite a compelling performance, Mr. Sunak said that the government will do “whatever it takes” to protect the economy”

“The announced GBP 30bn in immediate fiscal stimulus to cushion the impact of the Covid-19 virus is worth around 1.5% of GDP. If we add this to the GBP 175bn that will be invested in the country’s infrastructure over the next five years, it is at the higher end of expectations.” 

“Following our latest forecasting exercise, which includes a mid-2020 recession in the Eurozone and the United States, we now see a clear risk of a similar slowdown in the UK.”

“For 2021, we expect GDP growth to turn negative, as the British economy will have to make sharp adjustments to new trading relationships in a virus-struck and weak global economy.”