Bank of England: No New Stimulus Unveiled this Time

January 12, 2012

British monetary policy settings were not changed, nor were they expected to be.  The Bank rate has been at 0.5%, since it was halved 34 months ago in March 2012.  The ceiling on the asset purchase program (a form of quantitative easing) was last lifted in October 2011, going from GBP 200 billion previously to a new objective of GBP 275 billion.  Implementation of that increase continues and, according to a statement released today, should be attained by early February.  Minutes of this week’s meeting will be published on the 25th of this month.

Analysts and investors widely anticipated a further increase of asset buying to be announced after the next meeting of the Monetary Policy Committee on February 8-9.  The modal expectation is that the incremental gain will be GBP 50 billion then.  The current limit will have been reached by February 9, and the meeting will coincide with the next big review of Britain’s economy, the results of which will be reported in the Inflation Report due February 15.  Fact is that U.K. may have dipped into recession or is poised to do so.  Industrial production declines of 0.7% in October and another 0.6% in November traced a weaker pattern than expected.  The euro area, which is in recession already, is Britain’s main export market, and spending cuts and tax hikes continue to be implemented at home.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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