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28 Dec 2015
UK in 2016: Bank rate rises & Brexit risk - RBS
FXStreet (Delhi) – Ross Walker, Senior UK Economist at RBS, suggests that two issues will dominate the UK economic landscape in 2016: BoE Bank Rate hikes and ‘Brexit’ (British withdrawal from the European Union).
Key Quotes
“We believe the former are more likely than not, the latter (exit) less likely than not – but both are shaping up to be close calls, making 2016 a volatile year for UK financial markets. The RBS forecast is for the first 25bp Bank Rate hike in August 2016, with policy rates reaching 1.0% by the end of the year.”
“We expect a referendum on EU membership, perhaps as soon as early June 2016 (failing that by October), with a narrowish vote to ‘remain’ in the EU. There is a high degree of uncertainty around these events but a combination of EU exit and no rate rises cannot be dismissed as a remote tail-risk outcome (a ‘leave’ vote would probably result in less monetary policy tightening).”
Key Quotes
“We believe the former are more likely than not, the latter (exit) less likely than not – but both are shaping up to be close calls, making 2016 a volatile year for UK financial markets. The RBS forecast is for the first 25bp Bank Rate hike in August 2016, with policy rates reaching 1.0% by the end of the year.”
“We expect a referendum on EU membership, perhaps as soon as early June 2016 (failing that by October), with a narrowish vote to ‘remain’ in the EU. There is a high degree of uncertainty around these events but a combination of EU exit and no rate rises cannot be dismissed as a remote tail-risk outcome (a ‘leave’ vote would probably result in less monetary policy tightening).”