There is a 'high barrier' for BOE to cut rates below zero - Morgan Stanley

The firm says negative rates are unlikely even if there is a no-deal Brexit

In a note to its clients, Morgan Stanley argues that the odds of the BOE pursuing negative rates are unlikely and that in the event of a no-deal Brexit outcome, it could force the central bank to cut the funding rates (TFS) to zero but not the main policy rate (bank rate).

"With two heavyweight insider MPC members (Haldane and Ramsden) coming out publicly in opposition, at least at the moment, we see a high barrier to negative policy rates. We now think that outright cuts in the bank rate to below zero in a WTO-style Brexit outcome looks less plausible. Instead, adjusting TFS and providing term funding at negative rates, while leaving the bank rate at 0%, looks like the more plausible option."

Well, that's certainly one side of the coin but a lot will also depend on how well the UK economy can cope in light of potentially more negative Brexit developments and government fiscal measures wearing off over the next month or so.