The central bank is scheduled to adjust its monetary policy and the country’s interest rate on Thursday, and seemingly this meeting of the bank’s officials would once again be marked by heightened political tensions in the country.
As the country braces for the transition of power from Theresa May to her successor, the Bank of England is expected to once again manage to defuse the growing fear of subsequent economic mayhem, following the eventual official departure from the EU.
Official forecasts suggest that the most likely winner of the residency of 10 Downing street would be Boris Johnson, who has been one of the most outspoken eurosceptics in British politics and has expressed on multiple occasions his commitment to deliver Brexit at all costs, even without a secured trade deal with the union.
Conversely, investors have become wary about the increased prospects of a sudden and erratic departure of the country from the bloc with no guarantees for future trade relationships for local businesses with their European counterparts.
Following its last meeting in May, bank officials stated that:
“The Committee’s updated projections for activity and inflation […] assume a smooth adjustment to the average of a range of possible outcomes for the United Kingdom’s eventual trading relationship with the European Union. […] In the MPC’s central projection, global growth stabilises around its potential rate and Brexit uncertainties subside gradually.” [source]
Overall, this time the BOE would have to defend its previous stance about Brexit and reassure investors of its capacity to respond to the ever-present political uncertainties in the country by maintaining an accommodative monetary policy, which would remain stable as the eventual transition of power from Theresa May’s cabinet to the new PM is taking place. For that reason, general market expectations and forecasts imply that the most likely outcome of Thursday's meeting of the BOE would be for the board to maintain the interest rate at the current 0.75 per cent level.
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