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9 Sep 2014
What would be the impact on a 'yes' Scottish vote on BOE tightening expectations? - SocGen
FXStreet (Bali) - A “Yes” outcome on the Scottish independence referendum will force the BoE to be more cautious about tightening monetary policy, notes Alvin T. Tan and Olivier Korber, Strategists at Societe Generale.
Key Quotes
"The resulting drawn-out uncertainties and disputes surrounding the separation would likely prompt the BOE to be more cautious about tightening monetary policy. Moreover, a Yes win would be a huge negative shock to households and businesses across the UK, given the widespread complacency about the referendum."
"Pending clarity on the unknown steps towards Scottish independence, and the final political-economic-social arrangements, businesses are likely to cut back on their expenditures. The negative near-term impact on the UK economy will likely shift market expectations of a BOE rate hike to much later than the current expectation of the first 25bp hike by February 2015 (using the SONIA overnight rates as the benchmark). This will naturally weaken sterling broadly as BOE rate expectations are pushed back."
Key Quotes
"The resulting drawn-out uncertainties and disputes surrounding the separation would likely prompt the BOE to be more cautious about tightening monetary policy. Moreover, a Yes win would be a huge negative shock to households and businesses across the UK, given the widespread complacency about the referendum."
"Pending clarity on the unknown steps towards Scottish independence, and the final political-economic-social arrangements, businesses are likely to cut back on their expenditures. The negative near-term impact on the UK economy will likely shift market expectations of a BOE rate hike to much later than the current expectation of the first 25bp hike by February 2015 (using the SONIA overnight rates as the benchmark). This will naturally weaken sterling broadly as BOE rate expectations are pushed back."