LONDON (MNI) – The Bank of England’s first round of quantitative
had a significant effect on both Consumer Price Inflation and economic
output, according to Bank of England Chief Economist and Monetary Policy
Committee member Spencer Dale.

Dale also says that internal BOE research shows shows the asset
purchase program may have had roughly an equivalent impact on inflation
as a cut in Bank Rate of “between 150 to 300 basis points.”

In the foreward to the latest BOE Quarterly Bulletin, Dale writes:

“The analysis suggests a peak effect on the level of real GDP of
between 1.5% and 2% and a peak effect on annual CPI inflation of between
0.75 and 1.5 percentage points.”

“But there is considerable uncertainty about these estimates and
the precise impact of asset purchases or sales is likely to vary
depending on the circumstances in which they are conducted.”

Dale’s comments on QE follow those made by three of his MPC
colleagues last week.

Last Friday, Deputy Governor Charlie Bean said that the BOE
research suggests that a second round of QE would be effective.

“We have done a considerable amount of work on looking at the
benefits of QE. If we need more stimulus, another dollop of QE would be
effective, but it all hinges on the outlook,” Bean told The Sun
newspaper.

“In August I didn’t think it was appropriate but all of us will
look at the indicators as they come in over the coming weeks and take a
view ahead of our next meeting in October,” he added.

Last weak, external MPC member Martin Weale- who was voting for a
rate hike as recently as July – said he would even back more stimulus
now if CPI inflation were to be forecast undershooting the 2% target
substantially.

The August Inflation Report showed inflation at 1.7% in 2 years
time. Given the deterioration of the growth outlook no doubt the BOE is
already looking at an even lower estimate than that.

Weale told Reuters that he was confident that QE would work if the
MPC were to deploy it. In a recent speech he said that any further QE
should be targeted at the long end of the Gilt market.

Last Tuesday MPC member Adam Posen has said that the BOE should
attack the longer-end of the gilt yield curve with an additional round
of stg50bln of asset purchases to be made over the next three months.

In a speech in Gloucestershire, Posen said that with the global
economic outlook worsening, the bank should “arguably” make even more
asset purchases, perhaps of around between Stg75 or 100bln.

The Bank of England Monetary Policy Committee produced no surprises
at its September meeting, leaving Bank Rate on hold at 0.5% and issuing
no policy statement.

But many analysts believe the MPC is edging closer to further asset
purchases as euro zone tensions become yet more acute and the latest
batch of domestic economic data give shape to the downside risks
delineated in its last set of minutes.

A Market News survey conducted prior to the meeting found a growing
number of analysts expecting that the BOE will – at some stage –
undertake further asset purchases, with 40% now expecting BOE QE2 as
against 27.5% in the August survey.

In its August minutes, the MPC focused on the risks posed primarily
by the euro zone debt crisis as well as those which might emerge if
there was to be a “significant further intensification of concerns”.

–London newsroom: 4420 7 862 7492; email: wwilkes@marketnews.com

[TOPICS: M$B$$$,M$$BE$]