Merrill Lynch forecast: Bank of England to cut rates twice in next year
The Bank of England could slash interest rates twice over the course of the next 12 months, economists at the Bank of America Merrill Lynch have predicted.
In a note published today the US multinational investment bank has said it expects Threadneedle Street to cut rates by 25 basis points in November this year and May 2020.
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“While
this should not be a difficult call it feels difficult. Although the
Bank of England has recently turned dovish we think they will resist
cutting rates given how hard they argued for moving away from the
effective lower bound,” Merrill Lynch said.
It
added: “Inflation expectations in the UK may be slightly deanchored
on the upside rather than the downside. And all future Prime
Ministerial candidates are promising fiscal easing.
“We
also think the Bank of England waits until after the 31 October
Brexit deadline. It may be easier to factor in downside Brexit risks
at that point, especially if growth has remained weak to that point.”
Merrill Lynch also said in todays note that the growth outlook is worse than it had originally thought, as it forecasts 1.2 per cent GDP growth in 2019 and 0.9 per cent in 2020, with continued trade wars and a higher chance of a no-deal Brexit pushing down expectations.
The
predictions come on the same day as one member of the Bank of
Englands monetary policy committee (MPC) said interest
rates could be cut to almost zero if Britain leaves the European
Union without a deal.
Gertjan Vlieghe, a member of the rate-setting MPC, told an audience in London today that the central bank might have to slash rates to nearly zero in the event of a no-deal Brexit.
CityAM
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