Bank of England to wait for Brexit-EU trade pact outcome

17.12.2020 - Petr Mazaylo
Bank of England to wait for Brexit-EU trade pact outcome

The Bank of England is set to withhold more stimulus on Thursday as it waits for any adverse economic effects once Britain and the EU do not agree on a trade deal in two weeks.

The EU and Britain are still sorting things out to eschew the burden of import tariffs on trade from Jan. 1. This is why the BoE is poised to scrap its bond-buying programme at 895 billion pounds ($1.2 trillion), having ramped it up by 150 billion pounds last month.

The MPC is also seen to hold its benchmark interest rate at a record low of 0.1% at 1200 GMT. If last month the BoE said it was ready to take whatever it takes to reach its remit, it will have to be more explicit this time especially that the Brexit transition expires in two weeks and the coronavirus infection is rising once more.

According to Britain’s budget forecasters, a 2% wipe in Britain’s economic output will take place should it fail to strike a trade deal with the EU, as well as stir inflation and unemployment rates. The BoE thinks that even securing a trade deal will not immune the country with economic hazards as firms struggle with paperwork, port delays, and other effects of leaving the world’s biggest single market.

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