Get Ready for a U.K. Recession, Lower Interest Rates and More QE
Mark Carney warned U.K. voters it could happen. Now economists say it’s time to get ready.
Almost three quarters of respondents to a Bloomberg survey conducted after Britain voted to leave the European Union say the economy will slip into a recession for the first time since 2009. A majority also predict that the Bank of England governor and fellow policy makers will add more stimulus, including cutting interest rates in the third quarter.
The U.K. is in a mess,” said Alan McQuaid, chief economist at Merrion Capital in Dublin. “It will most likely be left to the central bank to clean up the politicians’ mess, with Mark Carney and his colleagues probably implementing further monetary stimulus before the year is out.”
In research published in the wake of the referendum, Goldman Sachs Group Inc. and Bank of America Merrill Lynch were among those forecasting an economic contraction. Both said the impact of the vote could subtract about a cumulative 2.5 percent from GDP.
According to the Bloomberg survey, 71 percent of 35 respondents said the decision to exit the EU will lead to recession. Of the 25 economists who forecast a time period, there was an almost even split between those expecting it this year and those who predict 2017. Just one said it will come later.
Sad Cameron blames Brexit on EU migration failure
David Cameron bade an emotional farewell to the EU on Tuesday night, saying Britain would not “turn its back on Europe” but claiming that he could have avoided Brexit if European leaders had let him control migration.
Mr Cameron, attending his final Brussels summit, said he wanted Britain to have “the closest possible” relations with the EU in future, but said the question of immigration could bedevil talks on a trade deal.
Japan PM Abe urges BOJ to ensure market liquidity after Brexit vote
Japanese Prime Minister Shinzo Abe on Wednesday urged the central bank to provide ample funds to the market to ensure liquidity and keep the wheels of economy turning in the wake of Britain's shock vote to exit the European Union.
"A sense of uncertainty and worry about risks remain in the markets," Abe told a meeting between the government and the Bank of Japan to discuss market developments after the Brexit vote rocked global financial markets.
It was the second meeting between Abe and the BOJ following the referendum and more are expected as Tokyo looks to put in place safeguards against potential instability in financial markets after Britain's messy EU divorce.
Abe worries Brexit could spread financial turmoil and trigger an unwelcome spike in the yen, hurting the export-reliant economy as a July 10 national election draws near.
Oil prices rise on Norway strike threat; Brexit shock fades
Oil rose on Wednesday as financial traders poured money back into commodities following the initial shock of Britain's vote to leave the European Union, and as a potential strike in Norway and crisis in Venezuela threatened to cut supply.
Brent crude futures were trading at $48.84 per barrel at 0422 GMT, up 26 cents from their last settlement. U.S. crude was up 35 cents at $48.20 a barrel.
Both oil benchmarks had climbed on Tuesday after markets shook off some of shock from the referendum in Britain in which most voters elected to exit the EU.
"The risk-on tone should see commodities continue to push higher," ANZ Bank said.
"Oil led the (commodities) sector as the shock of the UK voting to leave the EU wore off. Oil gains were solidified by news that the decline in Venezuela's oil output appears to be accelerating, while a strike in Norway also looked like it would impact production," it added.
Standard Chartered said that it expected oil prices to regain $50 per barrel rapidly after the Brexit-related fall as the referendum's impact on demand was limited.
Reference: Reuters,FT,Reference: Bloomberg
Thai
Eng