Friday, 18 September, 2020
BOE: JP Morgan view following the MPC meeting
BOE: JP Morgan view following the MPC meeting
Looks for GBP50bln QE in Dec
* JP Morgan now “pencils in” a GBP50bn QE extension for December. Previously JP Morgan had forecast no further easing but had stated that it would review this forecast after the September 17 meeting.
* JP Morgan thinks that the MPC will “delay an extension until December to learn more about the policy, political and economic outlook before choosing to act. This would also help the BoE to better calibrate the appropriate size of the package”. It adds “We were in a similar situation earlier this year when the case for a QE extension was clear at the BoE’s May Monetary Policy Report meeting, but the Bank instead delayed extending QE until the June meeting.”
* However, JP Morgan does not rule out a November move: “We’d expect dissent in November… However, if the news on the Brexit fails to improve and a no-deal is starting to look the more likely outcome by mid-Oct, the BoE could announce more QE sooner, and in larger size.”
* JP Morgan sees two messages from the NIRP discussion: 1) “the BoE is serious about negative rates.” 2).”the fact the BoE is beginning a consultation in 4Q should send a clear message that it is not close to implementing this policy in the next six months at least. We think the earliest the BoE could adopt negative rates is 2H21, with a potential cut to zero sometime next spring acting as a precursor to that.”
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