Berenberg: Cannot rule out unexpected rate cut by the Central Bank of England

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Jinshi data, September 19 news, Berenberg analysis said that the market's confidence that the Bank of England will keep the Interest Rate at 5% may be a bit too high. The Federal Reserve cut interest rates by 50 basis points on the eve of the Bank of England's announcement of the Interest Rate decision, and the data since the August 1 meeting has been relatively weak, suggesting that unexpected results may occur. Although a rate cut is not the bank's base forecast, it is expected that three of the nine members of the Monetary Policy Committee (MPC) will vote in favor of a rate cut. At this meeting, the MPC will vote on the target of reducing the UK government bond inventory. A year ago, they raised the target from £80 billion to £100 billion, achieving this goal through £50 billion of bond maturities and an additional £50 billion of active sales. Next year, the Bank of England will have as much as £87 billion of bonds maturing. Therefore, the same amount of active sales will shrink the balance sheet faster than before. The bank speculates that the MPC will make a more conservative decision to maintain the stability of the overall investment portfolio and mitigate the risk of oversupply of UK government bonds. However, the risk lies in the faster pace of Quantitative Tightening (QT).

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