As expected, the Bank of England (BoE) left the policy rate unchanged at 0.75%. Meanwhile, the central bank lowered the 2019 GDP outlook to 1.2% from 1.7% due to slower global growth as well as Brexit uncertainties. The revision in growth highlights the slowest growth since 2008’s global financial crisis.

The Brexit issue is causing tension in the financial markets. How these tensions are reconciled will have consequences for the path of monetary policy in ways that cannot be predicted in advance. We feel the central bank is keeping all its option open. We can expect the Bank to cut rates on a hard Brexit if the inflation risks are too strong. If there is lack of inflationary pressure, we can expect the Bank to cut rates to cushion a widelyexpected blow to the economy.

• As expected, the Bank of England (BoE) left the policy rate unchanged at 0.75%. Meanwhile, the central bank lowered the 2019 GDP outlook to 1.2% from 1.7% due to slower global growth as well as Brexit uncertainties. The revision in growth highlights the slowest growth since 2008’s global financial crisis.

• Key concerns pointed out by the central bank are on: (1) key parts of the EU withdrawal process that remains unresolved; (2) consumer confidence which has weakened significantly; and (3) constant “Irish backstop” subject continues to curtail any positive Brexit progress.

• The Brexit issue is causing tension in the financial markets. How these tensions are reconciled will have consequences for the path of monetary policy in ways that cannot be predicted in advance. We feel the central bank is keeping all its option open. We can expect the Bank to cut rates on a hard Brexit if the inflation risks are too strong. If there is lack of inflationary pressure, we can expect the Bank to cut rates to cushion a widely-expected blow to the economy.

Source: AmInvest Research - 8 Feb 2019