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Brexit hardline Johnson takes the lead in the battle for the phase of Brexit, the rate of Brexit without agreement in Britain is on the rise.
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SMM News: with Brexit hardline Johnson expected to take over as prime minister next week, Britain has the highest chance of leaving the EU without an agreement since October 2017.

Johnson has said that even if no agreement can be reached with the European Union, it will leave the European Union on October 31. The median forecast for an unagreed Brexit was 30 per cent, up from 25 per cent last month and 15 per cent in May, according to a July 15-18 survey.

"Johnson's chances of becoming prime minister and his comments during the campaign show that there is a greater chance of such a result than we had expected," said Peter Dixon of Commerzbank.

Hunter, another prime minister candidate, is also keen to show a tough stance on Brexit. The pound fell to a more than two-year low this week as investors expected an increase in the risk of a disorderly Brexit.

British MPs on Thursday approved a proposal to set up obstacles for the next prime minister to force an unagreed Brexit by suspending parliament, providing some support for the pound. The vast majority of analysts surveyed still believe that the UK and the EU will eventually reach a free trade agreement, a view analysts have held since they first began asking the question at the end of 2016.

But the second option this month is a more extreme Brexit without agreement and trade in accordance with the (WTO) rules of the World Trade Organization.

The most likely outcome in third place is that the UK retains its (EEA) membership in the European Economic area, provides the EU with a budget and stays in the single market, but has no say in policy.

The likely result in fourth place is to cancel Brexit altogether.

The central bank expects to keep interest rates unchanged

As the chances of a hard Brexit increase, so does the likelihood of a recession. The median forecast shows a 30 per cent chance of a recession in the coming year and 35 per cent in the next two years, compared with 25 per cent and 30 per cent, respectively, in June.

Growth forecasts remain modest, with the UK economy expected to grow by 0.3-0.4 per cent a quarter until the end of next year.

The forecasts are either unchanged or downgraded, with a change in expectations of what the Bank of England will do on interest rates.

It is now expected that the central bank will not adjust its target interest rates until 2021 at the earliest. The interest rate has been at 0.75% for nearly a year. In a June survey, analysts expected interest rates to rise by 25 basis points in the third quarter of next year.

"while the background of consumer price inflation in the UK appears to be relatively moderate, the continued rise in wages suggests that it is too early to consider cutting interest rates," said James Smith of (ING), a Dutch International (11.54,0.04,0.35 per cent) group.

"but the growing uncertainty about Brexit suggests that tightening policy this year is also unlikely."

Only 27 of the 76 analysts surveyed now expect to raise interest rates by the end of next year, compared with 36 of the 69 analysts surveyed last month. On the other hand, nine out of 76 now expect a rate cut by the end of 2020, compared with five out of 69 in June.

Royal Bank of Canada, one of the primary market traders in UK government bonds, changed its view earlier this month that the Bank of England would have to cut interest rates this year because of the increased risk of Brexit and global trade tensions.

"even if the UK leaves the EU smoothly, we do not necessarily agree that growth in the UK will accelerate significantly," Peter Schaffrik and Cathal Kennedy, economists at RBC, said in a client note.

In a speech last week, Flegg (Gertjan Vlieghe), a (MPC) member of the central bank's monetary policy committee, said the Bank of England might need to cut interest rates to near zero without an agreement to leave the EU.

The shift in confidence also reflects expectations for other major central banks. The European Central Bank is likely to cut deposit rates later this year, and the Fed is widely expected to cut rates at its meeting this month.

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