When the Bank of England announced a 150 billion pound increase in stimulus last month, it probably didn’t anticipate acting again soon.
If a Brexit trade deal had been signed by now, as expected, that would have been sufficient to shield the economy. But it hasn’t quite gone that way. Another Brexit deadline looms on Sunday and banks are quietly raising the odds of no-deal.
No agreement by Thursday’s meeting would mean the BOE will need to focus on increased risks to the economy and possibly open the doors for more stimulus and sub-zero interest rates.
Until recently, the 0.10% Bank rate was not expected to change until 2022. But Brexit deadlock means money markets now price a 65% probability of a 10 basis point (bps) cut by March 2021, doubling from a month ago.
– Bank of England ramps up stimulus again to tackle COVID-19 and Brexit hit
– Chances of Brexit trade deal narrow for banks and bookmakers