Signs That the BOE Might Start Cutting Rates Soon
The Bank of England held its monthly meeting yesterday. I was interested to see where they stand now after the UK elections, which produced a clear victor that was Boris Johnson. The BOE was stuck before the elections, due to uncertainty regarding Brexit and UK politics.
Now, things look clearer as Brexit is the only option for Conservatives and they already have a deal with the EU. So, I was expecting the BOE to be clearer, but they remained on a wait and see mode again. Now, BOE member Haskel is making some dovish remarks, as below:
Comments by BOE policymaker, Jonathan Haskel
- Current data justifies looser monetary policy
- UK outlook has weakened in the past year
- Cutting rates now would be insurance against rates getting stuck near zero in future
- Downside risks linger over BOE forecasts
- Brexit uncertainties may become entrenched and world economy may weaken
- Sees substantial chance of “quite weak” UK inflation in the near-term
- BOE may need “slow and gradual” rate hikes if the path to a post-Brexit trade agreement is smoother than expected
The British economy has weakened considerably this year, especially in recent months, as most sectors have fallen in contraction/recession, after holding up well last year. So, the BOE should start easing the monetary policy soon.
The only other scenario is that UK reaches a trade deal with the EU post Brexit, as the last comment suggests. But, that will take at least a year and until then, the economy will continue to weaken. So, all signs point to a monetary easing from the BOE soon.
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