Brexit: Large consequences, BoE to ease policy - BNP

According to analysts from BNP Paribas, Brexit will have consequences beyond economics and they expect the Bank of England (BoE) to ease monetary policy.

Key Quotes:

“UK’s historic vote to leave the European Union is now likely to be followed by a long process of negotiating the exit and the new relationship.”

“Within the Conservative party speculation over a change of leadership will probably now mount.

“With Scotland’s electorate having expressed a desire to remain in the EU there is a possibility for calls for a second Scottish independence referendum.”

“Uncertainty over the future UK-EU relationship and the UK political outlook will weigh on the economy. We expect it to stagnate over the next two to three quarters. Overall, we expect the level of GDP in 2018 to be almost 2% lower than previously forecast.”

“Sterling is expected to weaken which will put upward pressure on inflation. We see CPI inflation at 2.7% in 2018, against our previous 2.0% forecast.”

“We expect policy easing by the Bank of England: a reduction in the Bank rate to zero from 50 basis points, the activation of liquidity measures and a GBP 100bn increase in QE.”