Bank of England Still on Pause

June 7, 2012

The Monetary Policy Committee declined to change policy settings this month.  The Bank Rate has been at 0.5% for the past 3 years and 3 months.  The Asset Purchase Plan was last increased in February, a rise of GBP 50 billion to GBP 325 billion, and that limit was reached a month ago.  Investors will have to wait for minutes of this week’s meeting, to be released on June 20th, to learn the latest predisposition of policymakers and to see if anyone joined David Miles, the sole dissenter at the May meeting wanting to expand quantitative easing.  Back in May, there were other members of the committee who found the decision to leave policy alone rather than ease further to be “finely balanced.”  British GDP contracted by over 1.0% at annualized rates in both the final quarter of 2011 and the first quarter of this year.  Inflation remains above the 2.0% target but came down in the latest monthly report more steeply than forecast.  On the other hand, today’s service-sector purchasing managers index exhibited greater resilience than expected, and there is suspicion that the GDP figures are overstating weakness in the British economy.

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



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