Carney 'don't panic don't panic.'

Perhaps the rate cut was not a surprise, but agreeing to buy up 7% of the corporate bond market (£10bn) to drive down yields and increasing QE by £60bn to a staggering £435bn was way more than we expected. Moreover, broad hints of a further rate cut to near zero were suggested. It seems there is no limit to the strength of the dose of medicine the Bank are prepared to deliver in order to abolish any cycle.

This note examines the response, looks at the likely economic impact and judges that the policy is likely overkill could prove to be counter-productive. We look at a number of unintended consequences including the impact on asset allocation and pension fund liabilities and conclude that 'risk on' remains appropriate particularly secure growing income orientated equities, given the bond market equity income arbitrage and UK consumer cyclicals.