The firm is penciling two rate cuts by the middle of next year
h/t @ BruceReuters
The change in their call comes amid a downgrade in their forecast of the UK economy as well. As such, BofAML now sees the BOE cutting rates one in November this year and another time in May next year. This is a rather substantial shift from their previous call for the central bank to hike rates in May 2020 instead.
As for the firm's outlook of the UK economy, they now forecast UK GDP to grow by 1.2% this year (previously 1.4%) and by 0.9% in 2020 (previously 1.1%). Adding that:
"No-deal Brexit is not our base case, but it's a close call now. The upshot is the UK faces more persistent uncertainty than we expected previously and more intense uncertainty than other countries. So, we no longer expect a 'deal dividend' for growth in 2020."
Given how BOE members have been talking up downside risks to the economy, I reckon market participants are taking notice and shifting the consensus. If UK economic data continues to stutter in Q3, I would expect other market participants to join in the chorus here.
