LONDON - The Bank of England is likely to push back on Thursday against investors who bet that it will follow other central banks and cut rates in the coming months, even as the risk of a messy Brexit darkens growth prospects.
But it is less clear how Governor Mark Carney will tackle the challenge posed by a possible no-deal Brexit. The U.S. Federal Reserve reduced its main interest rate by a quarter of a percentage point on Wednesday, and the European Central Bank is expected to take similar action next month, as both battle a slowdown driven by the U.S.-China trade conflict.Chief economist Andy Haldane highlighted last week how British rates had not risen to anything like the extent they had in the United States, while Britain’s job market and inflation were much more buoyant than in the euro zone.
The BoE has said a rate cut is far from automatic if there is a disorderly Brexit as a further fall in sterling — already near a three-year low against major currencies GBPTWI=BOEL — would be likely to cause a persistent inflation shock. It also said markets were underestimating its willingness to raise rates if the economy grew as forecast.
Cutaggeddon coming everywhere.