UK monetary policy: Looser, sooner – RBS

Research Team at RBS, have revised BoE Bank Rate forecast and believe the MPC will put more emphasis on the (expected) downside demand shock than on near-term upside inflation risks from the pound’s depreciation.

Key Quotes

“We now expect two relatively early 25bp cuts in Bank Rate: to 0.0% (where the MPC has indicated they believe the floor is). These are unprecedented times so we must acknowledge the highly uncertain timing. As a holding position, we look for the first 25bp cut at the next scheduled MPC meeting on July 14th with a second 25bp cut at the 4th August MPC meeting (coinciding with the next quarterly Inflation Report). Before that, expect plenty of verbal intervention from policymakers. A resumption of QE asset purchases is perfectly feasible after Bank Rate has reached 0.0%.”