BOE expected to lower rates to 0.1% in November - BAML

Bank of America Merrill Lynch (BAML) stated in its latest note, published via FT, the BOE is on track to follow through on hints that it will ease again, based on undershooting growth.

The US bank said the benchmark rate is heading from 0.25% now to just 0.1% in November, with “a chance” of a trim in October. 

Key Quotes:

“Why 10bps? Because rate setters said the lower bound for interest rates was close to but “a little” above zero”

“And why not more bond buying instead?”

“Quantitative Easing (QE) is at least as much about confidence as “real” transmission channels: the BoE’s ‘failure’ to purchase all the bonds it wanted on the second day of the latest QE program could have damaged that confidence channel at the margin.

“QE’s effectiveness was anyway limited by pension fund deficit problems and already low yields. Another rate cut would, in our view, be the least bad option for the BoE.”