More Quantitative Easing from Bank of England

July 5, 2012

The Bank of England’s Asset Purchase Program has been increased by another GBP 50 billion.  The new ceiling becomes GBP 375 billion.  The previous increase in the program’s size was announced in February.  However, whereas that prior increment was met within three months, this new easing will take four months at a pace of GBP 12.5 billion per month to complete.  This expansion of quantitative easing despite higher-than-targeted inflation that stands currently at 2.8%.

A statement from the Monetary Policy Committee predicted that inflation would continue to ease both in the near term and medium term and that without additional monetary stimulus, a greater-than-50% chance existed that medium-term CPI inflation “would undershoot the target of 2%.”  In reaching that conclusion, the statement asserts that “the margin of economic slack is likely to be greater and more persistent” than imagined previously and observes that

  • British GDP has barely grown during the past 18 months,
  • Euroland’s debt crisis is spoiling Britain’s economic outlook,
  • Credit conditions continue to look tight in spite of prior monetary stimulus and other “recent and prospective actions to ease liquidity constraints,”
  • Fiscal consolidation will also dampen future aggregate demand in Britain.

Policymakers voted to retain the Bank Rate at 0.5%, where such has been since March 2009.  Minutes of today’s meeting will be published on July 18.

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



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