MNI REVIEW: BOE On Hold; Dovish If Brexit Uncertainty Endures>

     LONDON (MNI) - The Bank of England Monetary Policy Committee (MPC) 

was united in leaving Bank Rate and asset purchases unchanged at its 

September meeting 

     The following are key points from the minutes and policy decision: 

     -The MPC sketched out a fresh Brexit scenario in which uncertainty 

endures because the political situation leads to neither a deal or no 

deal but rather sustained uncertainty. 

     The MPC saw the rolling cliff-edge scenario, in which the Brexit 

deadline is pushed back again, as dovish for policy. 

     "Political events could lead to a further period of entrenched 

uncertainty .. the longer those uncertainties persist ... the more 

likely it was that demand would remain below potential," the MPC said. 

     -The committee restated its line that in the event of a smooth 

Brexit limited and gradual monetary tightening was likely but this was 

subject to "some recovery in global growth." 

     For the BOE to go along the hiking path, it probably requires not 

only a Brexit deal but some firming in global activity. 

     -In the event of no deal the MPC stayed with the collective line 

that policy could move in either direction. 

     Individual members, including Governor Mark Carney, have previously 

said that they believed easing was more likely than tightening on no 

deal but the committee collectively has not endorsed this line. 

     -At present the UK economy is going through a soft growth patch and 

the MPC said "excess supply appeared to have opened up in the economy." 

     The BOE found evidence that productivity growth was being dampened 

as a result of Brexit uncertainties. 

     While the output gap widening is supportive of keeping policy on 

hold, the low productivity growth is one factor which points to upward 

pressure on Bank Rate in the event of no deal. 

     -The MPC also gave its first take on the government's Spending 

Review, which set out increased public expenditure without specifying 

any offsetting tax increases. 

     Assuming the spending came from higher borrowing, the MPC said that 

it would raise GDP by 0.4 percentage point over its three year forecast 

horizon.  

 --London newsroom: e-mail: david.robinson@marketnews.com

[TOPICS:M$$BES,MT$$$$]