He adds: “If it were to raise rates, the Bank is unlikely to embark on a major hiking cycle. Such a move could hit the consumer and the economy quite hard, especially as lenders are already tightening credit criteria or restricting loans under pressure from the Bank itself.”
There is no sign the pound will rebound dramatically in the coming months, as the negotiations rumble on with very little indication of the outcome for either side at this stage.
Vinay Sharma, senior trader at ayondo markets, predicts sterling will only move lower as the negotiations over the terms of the UK’s departure develop.
“However, as is typically the case, it may take longer than the two-year negotiation period, and eventually there will be an agreement of sorts that appeases everyone,” Mr Sharma suggests. “Therefore eventually sterling will recover.
“I would imagine that spending power for Brits will remain depressed for many years to come as I envisage it will take many, many years before we get to pre-Brexit levels for sterling.”
eleanor.duncan@ft.com
