BoE slashes forecasts amid Brexit uncertainty – ING

James Smith, developed markets economist at ING, suggests that the Bank of England has taken a more dovish stance amid all the uncertainty with just 50 days left until Brexit.

Key Quotes

“Policymakers unanimously opted to keep rates unchanged, and the statement is littered with references to intensified uncertainty.”

“The extent of the downgrade to 2019 growth – from 1.7% to 1.2% – is much sharper than we had expected. The Bank now looks for just 0.2% in both the first and second quarter of 2019 and only a marginal improvement in the third.”

“The upshot is that the Bank is highly unlikely to tighten policy again through the first half of this year, and indeed the chances of a rate hike at all in 2019 have receded – although we think it’s too early to write one off completely.”

“Of course, all of that relies heavily on Brexit. Most paths now lead to an extension of the article 50 negotiating period, but if (and it's still a big if) the government can secure a cross-party consensus for a particular deal – for instance one that commits to a permanent customs union – then this may well be followed up with a Bank of England rate hike relatively swiftly.”