As Brexit could dramatically alter the near-term outlook for the economy, we are continuing to publish three sets of forecasts based on different Brexit outcomes (deal, no deal and more delays). But there are three common themes to this economic multiverse. First, GDP growth in 2021 may be reasonably good in all scenarios (although growth would slow sharply after a no deal Brexit and a decent rebound would require a swift and strong policy response). Second, fiscal policy will be much looser over the next few years than over the past few years. And third, inflation will spend most of the next two years above the 2% target. Those themes point to higher interest rates in time. If there is a Brexit deal or a delay, then interest rates may rise next year. If there’s a no deal Brexit, rates would be cut first.
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