FinanceGlossy

Brexit poses another problem for central banks struggling to combat low productivity and high debt levels on the path to growth and armed with narrow policy options. How does Brexit affect them, how might they respond and what are they likely to do?



Bank of England
"Some believe rates could be cut as early as next week, however others think the BoE will wait."

US Federal Reserve
"The US Federal Reserve began the year expecting to raise interest rates at least four times. The bond market expects no tightening this year and as a result of Brexit has begun to price in a small chance of an easing for 2016. The US two-year note yield has fallen to about 0.60 per cent, a level seen last October, before the Fed’s first tightening of policy for the current cycle. The recent dollar appreciation “represents in itself a form of monetary tightening and consequently the need for [the] Fed to raise rates has been pushed out further."

European Central Bank
"Mr Draghi is expected to cut interest rates further, or could expand QE in value or scope. However, his calls for structural reform are difficult as governments do not have strong mandates and many eurozone countries are facing elections."

Bank of Japan
"Brexit has fuelled expectations the BoJ will ease policy at its meeting in late July. They could cut negative interest rates further or apply them more broadly, but since being introduced in January, the BoJ’s Nirp has hurt banks - share prices are down more than a third this year. Expanding the massive and complex QE programme is another option."

People’s Bank of China
"The PBoC reacted to Brexit by adjusting the renminbi fix rate on Monday by the most since 2010 - a big move which "if done in isolation would have freaked markets out. They want the market to determine the exchange rate on a managed basis because they don’t want the outflows to become acute", says Geoff Yu of UBS Asset Management."

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