Today, the Conservative MPs began the process of whittling down the list of leadership candidates from five to two , see BBC . While Theresa May, as expected, got the most votes from Conservative MPs (165 out of 329), Liam Fox got the fewest (16 votes) and was eliminated from the race. Andrea Leadsom, Michael Gove and Stephen Crabb got 66, 48 and 34 votes. Earlier tonight, Stephen Crabb announced he has pulled out of the race voluntarily, leaving only three candidates left: Theresa May, Andrea Leadsom and Michael Gove.
The fact that we are now down to only three candidates means that the second Conservative MP vote on Thursday will be the final one. After that vote we will know which two candidates will be on the final ballot. Then the Conservative party members will vote and the result will be announced on 9 September.
The Bank of England (BoE) published its biannual Financial Stability Report today , see website for material. Besides Mark Carney's dovish speech from last week, it was the first time we heard from BoE after Brexit. BoE has identified five channels through which the referendum could increase risks to financial stability: 1) the large current account deficit, 2) the commercial real estate market, 3) the high level of household indebtedness, 4) subdued growth in the global economy and 5) fragilities in financial market functioning.
Due to BoE concerns about the risks to the economy and financial stability, the countercyclical buffer was reduced from 0.50% to 0.00% 'until at least June 2017'. This lowers the regulatory capital buffer by GBP5.7bn, thereby raising banks' lending capacity by up to GBP150bn, according to BoE. BoE thinks it is important that banks are able to draw on 'all elements of the substantial capital and liquidity buffers' that have been built up.
We think the lower countercyclical buffer is just the beginning of more BoE easing. We expect BoE eventually will cut rates down to 0.00% from 0.50% and expand its Asset Purchase Facility by in the range of GBP150-200bn. The first rate cut could come as soon as 14 July, when the next BoE meeting takes place.
A new Italian survey shows that only 28% of Italian voters would favour leaving the EU with 46% in favour of remaining and 26% being undecided or unwilling to vote. The survey also showed that only 20% of voters would be 'very favourable' to an Italian EU referendum. A survey conducted before the UK's vote to leave the UK showed that in Italy 48% would vote to leave the EU in case of a referendum.
The re-run of the presidential election in Austria has been scheduled for 2 October. The far-right Freedom Party has raised the prospect of Austria holding an EU referendum, but according to political analysts the tactic comes at a risk due to a solid support for European integration, see Reuters .
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