Bank of England Keeps Status Quo

April 4, 2013

Almost always when the Monetary Policy Committee decides not to change policy settings, it initially reveals no details about its latest thinking or voting pattern.  So it is in today’s released statement, and such information must wait until minutes are released on April 17th.  In the meantime, the Bank Rate of 0.5% since March 2009 has been retained, and an Asset Purchase Program, that is quantitative easing, retains a size of GBP 375 billion.  The last announced increase of QE was made in July 2012 — an increase of GBP 50 billion at the time after an alternative GBP 75 billion change had been discussed.  By late Autumn, the new limit had been met.  At the February and March meetings of the committee, the vote split 6-3, with Governor King in each instance siding with the minority that favored additional quantitative easing now.  The U.K. economy has stagnated under Tory rule.  Fiscal restraint has not improved public finances, and inflation has been higher than hoped.  The current account deficit has widened alarmingly, and sterling has depreciated.  Britain’s is one of two nearly pure economic experiments in the world. The U.K. experience is demonstrating the futility of fiscal restraint during periods of recession and/or considerable underutilization of economic resources.  Now Japan will be testing the widely held view that inflation is a monetary phenomenon alone, which if so gives a central bank no excuse for failing to eradicate deflation.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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