The domestic leg is struggling due to a combination of weak real wage growth limiting the scope for private consumption growth and Brexit uncertainties weighing on business investments. Economic growth is set to remain weak in coming years.
Inflation is set to move lower, as the effect of the GBP depreciation is fading.
Our base case for Brexit remains a 'decent Brexit' where the UK leaves the single market and most likely also the customs union but strikes a free trade deal agreement similar to the one the
EU has with Canada (probably more comprehensive on services). We expect a lot of noise ahead of the important EU summits later in June and in October.
We still expect the Bank of England to tighten monetary policy but believe it will do this more gradually than we previously expected, as economic data have surprised on the downside.
To read the entire report Please click on the pdf File Below: