The Bank of England will cut interest rates to zero – TDS

Analysts TDS believe that after the results of the referendum in the UK the Bank of England will cut interest rates to zero:
“We expect that the UK will enter a short and shallow recession like as increased uncertainty from the victory in the referendum on the exit from the EU will have an impact on the demand for both households and firms. While the exchange rate will help to neutralize part by weakening exports, this gain will be limited.
Inflation will rise to above 3% y / y by mid-2017, but the Bank of England will turn a blind eye, as it will focus on medium-term price pressure.
The Bank of England, however, will stimulate the economy. It remains a lot of uncertainty regarding the timing, composition, degree of policy measures, but ultimately we expect a reduction of the interest rate increase in the “quantitative easing”. ¬†Although the observed increase in inflation for this year and next, Ban will focus on medium-term inflation risks, and stagnant demand in the coming years will focus on support costs, rather than the fight against inflation, increased momentary change in the exchange rate.
We believe that the first step will be a rate cut to zero. Balance chance inclined to lower rates by 50 basis points at the meeting of the Monetary Policy Committee in August (which coincides with the quarterly report on inflation, and the press conference), although we would not rule out a scenario of two rate cuts of 25 basis points, one in August and another in September. Markets are now lay in the price of only 72% chance of a rate cut by September, we believe that there are attractive opportunities.
“Quantitative easing” can follow this in November. While we hesitate now be too specific as to the exact time and amount, as much will depend on changes in the economy between now and the time of the decision, we believe that the initial package of “quantitative easing” of 75 billion pounds will be announced at the November meeting of the monetary policy Committee, and “quantitative easing” in 50 billion pounds will be announced at a subsequent meeting in February, and over 50 billion at the May meeting of the Committee on monetary policy if necessary. “

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