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BoE Review: September 2020 - November Decision Hangs on Brexit

MNI REVIEW: BOE Leaves Policy On Hold; Negative Rates In Box
  • Yesterday's MPC meeting saw gilts and short sterling rally as the MPC Minutes noted that the MPC "had been briefed" on plans on how negative rates could be "implemented effectively" and stating that the BoE and PRA "will begin structured engagement on the operational considerations in 2020 Q4."
  • The MNI Markets team now expects a small QE extension if there is a Brexit deal agreed before the November meeting or else a GBP100bln extension that would allow the pace of QE to be increased substantially if the gilt market required. A move to zero for rates and probably negative rates would also probably be necessary if a no deal Brexit hits and Covid's impact on the economy shows no sign of waning.
  • Outside of the risk of Brexit and assuming we are not thrown into another nationwide lockdown from Covid-19 (two big assumptions), we continue to believe that the labour market data hold the key to future policy changes (see our full analysis article here for more).
  • We have read through 14 analyst reviews of yesterday's BOE meeting and all now expect an extension of QE by the end of the year. In actual fact, half of the analysts have changed their base case expectation (see full document for details).

Central Bank ReviewHomepageBoE- ReviewCentral Bank ReportsMarkets
Central Bank ReviewHomepageBoE- ReviewCentral Bank ReportsMarkets

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