Bank of England Preview

November 4, 2009

For the ECB, the key meetings fall in March, June, September and December because new staff forecasts are announced at those times.  For identical reasons, the key Bank of England meetings tend to be those in February, May, August and November.  Thursday’s announcement from the Monetary Policy Committee needs to address the issue of whether to load up more asset purchases in that program.  The minutes from a month ago said as much:

All Committee members, however agreed that recent developments were not sufficiently compelling to justify revising the target level of asset purchases that had been agreed at the August meeting or to change the level of Bank Rate at this meeting.  The forecast round ahead of the November Inflation Report would provide an opportunity to assess more fully how the medium-term outlook for activity and inflation had evolved since August.

The decision is not going to be easy, and dissents from a decision to do an extra Gbp 25-50 billion of asset purchases likely will draw some dissents.  Third-quarter negative growth of 1.6% annualized and 5.2% from 3Q08 cries out for continuing quantitative easing, but there have also been upside surprises like rising house prices and October purchasing manager indices that jumped by 3.8 points to a 23-month high of 53.7 in manufacturing and 1.6 points in non-manufacturing to a 25-month high of 56.9.  One conceivable compromise might be to modify the types of assets to be purchased.  The Bank of England’s Bank Rate has been at 0.5% since March and isn’t going to get raised anytime soon.

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



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