BoE review: Easing package, more to follow in November – Danske Bank

Research Team at Danske Bank, notes that as expected the Bank of England (BoE) delivered a substantial easing package last week, including a 25bp Bank Rate cut to 0.25%, GBP70bn QE (GBP60bn government bond and GBP10bn corporate bond purchases) and a new Term Funding Scheme (TFS).

Key Quotes

“BoE maintained a very dovish stance indicating a further rate cut later this year to the effective lower bound at above but close to zero. BoE also stressed that it can do more QE (both gilts and corporate bonds) if needed.

We expect BoE to cut the Bank Rate by 15bp to 0.10% and to increase its buying of both gilts and corporate bonds at the November meeting.

We expect weak GDP growth, monetary policy and flows to weigh on the GBP in the coming quarters. We forecast EUR/GBP to rise to 0.90 in 6M. Longer term we expect EUR/GBP to stabilise to some extent given attractive valuations. We target 0.88 in 12M.”