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The Bank of England also said its outlook was “conditioned on the assumption of an immediate, orderly move to a comprehensive free trade agreement with the European Union on 1 January 2021.” That has come into doubt after the recent actions from the Boris Johnson-led government, including introducing legislation that would defy arrangements on Northern Ireland it had previously accepted on a withdrawal agreement with the EU.
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The pound fell sharply after the decision, trading below $1.29 after closing on 16 September at $1.2969.

Minutes released from the meeting show it had been briefed on how negative interest rates could be implemented effectively, “should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates.” The Bank of England said it will begin “structured engagement on the operational considerations” in the fourth quarter.

“The simple observation that there will be engagement with regulators about how to implement negative interest rates has already overhung the pound and influenced the gilt market, but that’s to be expected when a three-hundred-year-old institution hints towards an inaugural negative interest rate policy,” said Chris Bailey, European strategist at Raymond James.

“The more established path remains boosting the size of the quantitative easing stimulus effort, but that will only happen if the Bank of England believes the combination of negligible inflation and rising unemployment over the next few quarters necessitates a further loosening of policy. All we can say for now is that the uniqueness of 2020 continues to build, and international investors who have found many reasons to avoid UK assets over recent years have yet another issue to worry about,” added Bailey.