Loose monetary policy to anchor gilt yields for years

Despite the Bank of England having slowed the pace of its gilt purchases to below that of gilt issuance (see Chart 1), our forecasts that it will expand the size of its quantitative easing programme by a further £250bn and won’t raise Bank Rate above 0.10% for five years will anchor 10-year gilt yields to 0.25% or below for many years. Meanwhile, equity prices and the pound would receive a boost if our working assumption that the UK and the EU will agree a slim trade in goods Brexit deal by the end of the year pans out.