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    BoE to ease monetary policy in case of Brexit -  Danske Matías Salord

    Today the Bank of England as expected left interest rates and the purchase program unchanged. According to analysts from Danske Bank the central bank will ease monetary policy in case of Brexit.Key Quotes:“The BoE did not want to interfere too much in the referendum campaign and is just waiting for the referendum outcome to tick in next Friday. The BoE said it is ‘difficult to interpret’ recent data releases and that the ‘committee is being more cautious in drawing inferences from them’.”“The BoE repeated that ‘whatever the outcome of the referendum, the MPC would use its tools to achieve its inflation remit’. The latter we interpret as a sign that the BoE is ready to ease monetary policy if necessary. Although there is some speculation that the BoE could increase the Bank Rate as a response to higher inflation through a sharp GBP fall in case of a Brexit, we think the BoE will look through this, due to the negative impact on demand.”“In case of a Brexit we expect the BoE to ease monetary policy to support the economy. To be more specific, we expect BoE to cut the Bank Rate from 0.50% to 0.00% (currently, the BoE has ruled out negative rates but other central banks with negative rates did that previously as well) and resume the QE programme (APF). If needed, it could also ease credit through an extension of the ‘Funding for Lending Scheme’ (FLS). In case of a Bremain, we expect growth to pick-up in H2 16 and we expect the BoE could hike in Q1 17 although risks are skewed towards a later hike.”  

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