BoE: pushing back shock and negative rates
- The BoE made no policy changes in August but published an overdue forecast update. The shock is now less concentrated in Q2 than indicatively projected in May, but the recovery it sees is still more optimistic than I forecast.- Negative rates were deemed unhelpful under the prevailing circumstances, with the Governor pleading at the press conference against thinking this is the plan.
- Future policy changes appear to require new demand shocks, where I continue to expect a disappointment that prompts further asset purchases. Projected excesses in demand and inflation are not dovish, but forward guidance offsets that.
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