BofA says zero rates may be the only option the BOE has to deliver more stimulus in order to counteract the economic fallout in the UK
The firm expects the BOE to expand its bond-buying programme next week by £100 billion, something which should not be much of a surprise given that policymakers have hinted that at the current pace it will run out by July.
But amid the ongoing fallout from the coronavirus outbreak and the fact that UK economic conditions look to have been hit rather hard by the pandemic, BofA says that the BOE may have little else but to cut rates to zero and leave open the option of NIRP in August:
"If the BOE feels more stimulus is needed, cutting the bank rate to zero seems to be almost the only option. To maximise that stimulus, the BOE needs to avoid truncating the policy rate distribution at zero, so negative rates need to be on the table."
Adding that they may also introduce a "weak form of yield curve control" should they need to do more to navigate the economy through the coronavirus crisis.