As expected, the Bank of England MPC kept rates unchanged at 0.75% and analysts at Rabobank point out that the forward guidance of a slow rise in rates provides the markets less and less actual guidance, as it has become explicitly conditioned on a happily-ever-after world.
Key quotes
“The MPC’s forecasts are based on Johnson’s Brexit-deal and speedy negotiations towards a “Canada-style” FTA. This may prove to be too optimistic and could lead to further downward revisions to their forecasts, which are already quite downbeat on Johnson’s Brexit-deal.”
“It’s very difficult to see how the next UK government will be able to negotiate a Canada-style FTA in just one year, if it’s not keen to ensure a level playing field between the EU and the UK. Keep in mind that it took Canada seven years to get a trade agreement with the EU. “
“The new Governor will be handed an economy that is being put under strain by Brexit. Business investment has been in the doldrums for almost two years and cracks have also started to become visible in the labour market. The uncertainty is hitting the UK economy hard and we therefore expect two rate cuts in 2020.”
Share
