Monetary and Fiscal Options in the Event of a 'No-Deal Brexit'.

Highlights from the article: Monetary policy has some room to respond if inflation expectations and labour costs are anchored (and also thought to be anchored by policymakers) at a level that is consistent with the medium-term 2 per cent inflation target. A number of EU measures, for instance regarding financial services, are explicitly temporary and serve the purpose of allowing EU importers to switch from UK to EU suppliers. This option would not be available in a scenario where wage growth picks up and policymakers believed that inflation expectations would be dislodged if monetary policy did not actively and immediately offset an EU exit-related spike in inflation. An active monetary policy response to inflation, may limit inflation volatility but will also imply a much larger short-run fall in output, as a consequence.