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The Bank of England will expand its quantitative easing program at next week’s meeting, according to the Standard Chartered research team, which points out to a division in the committee about the effectiveness of negative interest rates.

Key quotes

“We expect the Bank of England (BoE) to announce an additional GBP 100bn of QE purchases on 5 November given the deterioration in the economic environment stemming from new COVID-19 restrictions; such an announcement would take the target to GBP 845bn. “

“Monetary Policy Committee (MPC) members remain divided over the effectiveness of taking rates negative, and a review into their potential use is unlikely to be completed until December at the earliest. Given the lack of consensus between MPC members, negative rates will likely be resisted this year barring significant economic or financial deterioration, either as the result of a shift to full national lockdown, a no-deal Brexit outcome and/or greater-than-expected easing by the European Central Bank (ECB).”

“We think the February 2021 meeting is the more likely time for a cut to negative, particularly if the Brexit aftermath (even with a deal) and COVID impact prove worse than expected.”