Ratings agency Fitch on the Bank of England actions, "a proactive policy response":
- decision to cut rates (to 0.25% from 0.5%)
- expand bond buying (by 60bn of government bonds and 10B of UK corporate bonds)
- and set up a new funding scheme for lenders
Will "cushion, rather than fully offset, the shock to UK growth"
With the bank already having "reduced the counter cyclical capital buffer for UK banks" Thursday's moves "forestall" the risk of a significant tightening in credit conditions. But they will not outweigh the capex investment impact, citing
- Sharply higher uncertainty on international trading arrangements
- Political uncertainty
- Regulatory uncertainty
Fitch's forecasts:
- UK investment to be 15% lower by 2018 (relative to the agency's May forecast)
- Expect a "significant toll" on the economy
- Even though the fall in GBP will potentially support exports
- Growth forecasts 1.7% in 2016 (down from 1.9% in May)
- 0.9% in 2017 and 2018 (down from 2%) (these compare with the BoE forecasts of 0.8% GDP growth in 2017, down from 2.3% in May Inflation Report)
