Bank of England: Easing coming in August - Danske

According to analysts from Danske Bank, the Bank of England will eased on August. They expect a cut to 0.00% but warn about risks of a less aggressive easing attitude after leaving today monetary policy unchanged.

Key Quotes:

“Against our expectation, the Bank of England (BoE) maintained the Bank Rate at 0.50%. Given BoE Governor Mark Carney’s very dovish speech two weeks ago in which he said that ‘some monetary policy easing will likely be required over the summer’ due to a deterioration in the economic outlook, we expected a 25bp rate cut today in line with market pricing.

“While the Bank of England did not ease monetary policy today, it preannounced easing at the next meeting on 4 August, as the minutes state that ‘most members of the Committee expected monetary policy to be loosened in August’. The reason is that there are ‘preliminary signs that the result has affected sentiment among households and companies with sharp falls in some measures of business and consumer confidence’.”

“The BoE plans to publish its new economic forecasts in the next Inflation Report in connection with the August meeting. We continue to expect it to cut rates down to 0.00% and possibly ease using unconventional tools as well in August but given today’s announcement, we believe the risk is the BoE will ease less aggressively, e.g. by cutting only 25bp. If it does not lower the Bank Rate to 0.00% in August, we believe it will do so eventually, as we expect the UK to fall into recession in H2 16.”