BoE expected to be on hold in 2020 – Nordea

Analysts at Nordea Markets are expecting the Bank of England (BoE) to be on hold in 2020.

• "We do not buy into Boris Johnson's "promise" that a ratified divorce deal in itself should result in an investment boom, which could prompt a rate hike. Instead, we expect the BoE to take a wait-and-see approach, as they await the economic impact from the clarity around the divorce deal as well as how the phase two negotiations unfold.
• Some market participants have speculated in an upcoming rate cut from the BoE in the past six months or so. In our view, however, a cut in at least January can almost completely be ruled out due to timing obstacles (January meeting is on the day before the exit day, 31 January).
• Longer out, the BoE will also probably find some comfort in a modest growth rebound in Q1, and when looking at the last few years' reaction function of the BoE related to Brexit uncertainty, they have usually preferred to be patient rather than acting precautionary.
• The big "if" and possible game-changer besides Brexit, is though who will replace Governor Carney at the end of January. As evident after the 2016 referendum, Carney has not rushed the BoE into any big changes, but a new Governor could take a more precautionary approach (i.e. cut rates) as, for example, the Fed has done in 2019."