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Financial institution of England: Ready on Brexit – ING

“If – and it is a very large if – the British Prime Minister can defy the chances and persuade parliament to approve her Brexit deal in December, then we expect this is able to maintain the Financial institution on-track to hike charges in Could 2019, doubtlessly adopted by a second improve in November,” clarify ING analysts.

Key quotes

“Nevertheless, it seems more and more seemingly that Parliament will reject the deal. This might open the door to a snap election (or perhaps a referendum), though this appears a tall order provided that it could require quite a lot of Conservative MPs to again it.”

“With out an election or referendum, then avoiding ‘no deal’ will boil down as to if Prime Minister can discover help for her deal second time round.”

“Our base case remains to be fudge might be discovered that passes by Parliament and avoids ‘no deal’, though this won’t occur till a lot nearer to the EU exit date in March. Which means that companies and customers are prone to develop extra cautious over the winter. Once more, this is able to push the date of the following fee hike additional again into subsequent yr to let the mud settle.”

“Lastly, if the UK does fall off the cliff edge, then BoE policymakers have recommended charges may go in both route. Nevertheless, any supply-side shock would seemingly be coupled with a pointy hit to confidence, so we suspect the Financial institution will deal with progress and look by any currency-induced inflation spikes. We predict coverage easing can be seemingly, though we get the sense that policymakers might wait just a little longer than they did in 2016 earlier than performing, to get extra proof on the true financial image.”

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