Rate call on track, a Brexit transition into the unknown

Thursday’s interest rate decision was a good first step on the road to vindicating our view that interest rates won’t be cut this year. And the Bank’s new forecast suggests that the bar to a rate cut is higher than you might assume. Meanwhile, Brexit at 11pm tonight has some immediate political consequences. But the 11-month status quo transition period means the direct economic impact will be nil until 31st December 2020. A more distant economic relationship with Europe thereafter will be another headwind to productivity growth, but in the grand scheme of things it won’t be a large one.