*BOE CUTS RATE TO 0.25%, EXPANDS QE BY GBP60B, BUYS CORP. BONDS (these corporate bond buys by the BOE are aggressive, surprised the street)

*BOE: MAJORITY OF MPC EXPECT RATE CUT TO NEAR ZERO BY YR END

*BOE VOTES 9-0 TO CUT RATE, SPLITS ON QE, CORPORATE-BOND PLAN

*POUND EXTENDS DROP VERSUS DOLLAR, FALLS 1.1% TO $1.3169

The Bank of England has slashed interest rates for the first time in more than seven years and delivered an emergency package worth up to £170 billion to ward off recession following the Brexit vote.

Our central banking Gods voted unanimously to cut rates to a new historic low of 0.25% from 0.5% – the first cut since March 2009, when the Bank reduced rates at the height of the financial crisis.

Cause: the Pound is off 11% since the Brexit drama hit markets.  Effect: inflation risk over the next 12 months is high and presents challenges to Mark Carney and the Bank of England.  The BOE does not have that many bullets left in the gun in terms of rate cuts with rising inflation risk.  Globalization has brought inflation sharply lower in recent years.  On the other hand, as the UK pulls back from the global economy through Brexit, this presents higher inflation risk over the next 12 months and is a heavy short term motivator behind the BOE today.

We believe markets are transitioning from “high” back to “low” in terms of the market’s faith in central bankers.  On February 10th with the S&P 500 at 1810 confidence stood at the lowest level in years.  Each day the “beast inside the market” wants more and more and the bar is more and more elevated.  This presents near term challenges for U.S. equities.  Pick up our latest report below: