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BofA view following the MPC Meeting

BOE

Push back rate cut expectation to Feb vs Nov

  • BofA state that "the negative rates talk today may have been intended to create room for QE in November to have more impact while the BoE completes the technical preparations to cut Bank Rate further next year. There would be some sense in this if the BoE bracketed zero Bank Rate in the same category as negative Bank Rate. On balance we now expect Bank Rate cut to zero in February, vs. November previously."
  • BofA add that the paragraph on operational considerations "suggests to us that the BoE is more prepared to use negative rates than we thought." And state that "we have more conviction in forthcoming Bank Rate cuts, and especially cuts into negative territory in a no deal Brexit scenarios, but less conviction that a cut to zero will come in November."
  • BofA continue to expect a cut to -0.50% in a no deal Brexit scenario.
  • Regarding the meaning of "operational considerations", BofA point out two possibilities "whether the BoE is discussing the design of potential tiering; and how the TFS would interact with negative Bank Rate."

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