Bank of England Conveys Little New Information

September 10, 2009

The Bank of England left its interest rate at 0.5%, made no change in its asset purchase program of Gbp 175 billion, and released a very brief statement that indicated minutes of today’s meeting will be published on September 23rd.  The Bank Rate has been at 0.5% since March.  The prior peak of 5.75% ended with an initial cut of 25 basis points in December 2007, followed by two more cuts of 25 bps in February 2008 and April 2008.  After a six-month policy pause, the rate was reduced aggressively by 50 bps in October, 150 bps in November, 100 bps in December, and 50 bps in each of the months of this year’s first calendar quarter.  At that point, Bank of England officials turned to quantitative easing, initially announcing plans to buy Gbp 75 billion of assets, mostly gilts by creating reserves.  That amount was subsequently raised to a limit of Gbp 125 billion and then Gbp 175 billion just last month.  Minutes from that meeting in August revealed that a third of the nine-member Monetary Policy Committee had voted to raise the asset purchase program by Gbp 75 billion to Gbp 200 billion, a group that included Governor King and renown policy hawk Besley.  It’s likely that the asset purchase plan will get extended further if not in October than in November when new staff forecasts are to be prepared.  Investors will comb the minutes on September 23rd to see if there were any votes to hike asset purchases at today’s meeting.  British growth in 3Q09 is likely to be softer than GDP growth in Japan, Euroland, or the United States.

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



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