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JP Morgan View Following the BOE MPR

BOE
  • JP Morgan notes that the "BoE concludes "no for now" on negative rates, but Bailey reveals the policy has nevertheless slipped into its toolbox… The earliest we could see NIRP introduced is well into 2021. And it would also require a calmer environment, e.g. when the economy is making a solid recovery but inflation is undershooting"
  • JP Morgan adds: "The existence of the TFS scheme enabled the BoE to slash rates 65bps this year just as a major crisis was unfolding. There is no mention from the BoE as to why this scheme would not again be viewed as effective in shielding banks from the adverse impact on net interest margins."
  • "We had argued recently that the BoE would conclude it could cut rates further as part of its review (i.e. down to zero in the first instance). That remains possible, but the BoE's current tone leaves this looking a little less likely to happen this year. Instead, the BoE is highlighting asset purchases and forward guidance as the active tools for the time being."
  • JP Morgan highglight that the BOE's "forecast for the next year now looks more similar to ours. The main exception is that we have a slower recovery in 2021 and a lower level of activity during that year. This is partly due to the more negative Brexit assumption we have built in as the UK transition period ends."
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