Despite cutting interest rates by another 1% in December to 2%, the Monetary Policy Committee (MPC) has signalled that it has more work to do. Given the further deterioration in the economic outlook, we now think that interest rates will fall all the way to zero, with another 1% cut at the upcoming meeting getting rates halfway there. It may therefore not be long before the Bank of England is following the Fed in openly pursuing a policy of quantitative easing.
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