BoE’s change of heart might be overdone

The Bank of England drove a bulldozer through its near-term projections this week as it ratcheted up the severity of Brexit uncertainty and the corresponding impact on the economy in its forecast. We have some sympathy with the Bank’s change of heart. The downgrade is similar to the shift we made in early January to putting more weight on our “fudge and delay” scenario in which prolonged uncertainty weighs on the economy. But whereas the Bank thinks growth would only return to trend following a resolution to Brexit, we think it could rebound more strongly.