Three months after the U.K.'s historic vote to leave the EU, we're beginning to see hard evidence about Brexit's immediate impact on growth in Britain and the European Monetary Union. In short, the sky hasn't fallen on either side of the Channel, contrary to concerns that the U.K. would soon fall into recession, precipitating a marked slowdown in the European Monetary Union. Our own initial assessment, which we published in early July, forecast a relatively benign hit to U.K. growth in the short-term--that appears to be playing out. However, we revised our growth projections for 2017 and 2018 sharply downward. Here, while we haven't made any major revisions to our July forecast, we now more clearly see the factors that are likely to influence the longer-term outlook either up or down, both in the U.K. and in the eurozone.
Negative interest rate policy, as an aspect of monetary easing by central banks, is an odd thing. How can an interest rate be negative? Doesn’t that mean the lender gets back less than it lends, seemingly violating the economic truism that there is a (positive) time value of money?