Bank of England Makes No Further Monetary Policy Changes

June 4, 2009

As expected, the Monetary Policy Committee kept its Bank Rate at 0.5% and did not expand its Asset Purchase Program further.  The program was implemented in March at Gbp 75 billion initially and extended after the May MPC meeting by another Gbp 50 billion to Gbp 125 billion.  The last Bank Rate reduction was made in March, a drop of 50 bps.  There were also cuts of 50 bps each in February and January.  In 4Q08, the key rate was slashed by 50 bps in October, 150 bps in November and 100 bps in December.  The first three easings in December 2007, February 2008, and April 2008 each amounted to 25 basis points from a prior peak level of 5.75%.

The Bank of England’s statement today is short and not very informative, other than to indicate that Gbp 80 billion of the Asset Purchase Program has been completed so far and that the remaining 45 billion pounds are to be completed by the August meeting.  The statement does not address economic or financial market conditions but simply says that minutes of this week’s meeting will be released on June 17th.

Sterling is 0.2% softer than it was before the announcement but shows a net gain of 8.2% against the dollar 2% against the euro since the May meeting.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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