BoE expected to begin easing monetary policy - MUFG

Lee Hardman, Currency Analyst at MUFG, suggests that market participants’ focus will now likely shift back towards the BoE’s upcoming monetary policy on Thursday.

Key Quotes

“The BoE are expected to begin easing monetary policy in response to the negative shock to the UK economy from the Brexit vote. Governor Carney has already clearly signalled that he expects the UK economy to slow materially which will justify looser monetary policy over the summer months. He highlighted as well that there remains a range of policy options available.

We expect the BoE deliver at least a 0.25 percentage point reduction in their key policy rate at this week’s meeting and to signal that more easing is likely when they meet again in August.  By then the BoE will have had more time to assess the initial impact of the Brexit vote and update their outlook for the UK economy in their latest Quarterly Inflation Report. The weak performance of the UK economy and expectations of looser monetary policy from the BoE should keep the pound under downward pressure in the coming months.”