LONDON (MNI) – Several analysts have reacted to the
stronger-than-expected UK GDP data by withdrawing their predictions that
the Bank of England’s Monetary Policy Committee will expand its
quantitative easing program at its November meeting.
Figures from National Statistics released Thursday showed that UK
economic growth bounced back strongly in the third quarter to rise at
its fastest pace for five years, helped by Olympic ticket sales and
base effects from the Jubilee impacted Q2.
Following the publication of the data the UK economics research
team at Barclays, which previously predicted an additional Stg50 billion
of QE in November, said it had changed its call and now expects the
current round of asset purchases, due to be completed at the end of this
month, to be the last.
“Our change of view has been prompted by stronger-than-expected Q3
GDP data as well as relatively upbeat comments on underlying economic
growth from two pivotal members of the MPC. In light of these
developments, as well as recent signs of additional inflation
stickiness, we now think it is unlikely that a majority of the MPC will
support additional QE in November,” Barclays said in a research note.
Philip Shaw, UK Economist at Investec has also switched his call
and now forecasts no additional QE in November.
“This switch is only marginally to do with today’s numbers and more
tied to the fact that inflation looks set to rise next month and that
Sir Mervyn King appeared to be a touch reticent over sanctioning more QE
at his speech in Cardiff on Tuesday evening,” he said in a note.
Vicky Redwood, Chief UK Economist at Capital economics also said
that while she expects the MPC to sanction more QE in the future, the
better-than-expected growth figures could well lead the BOE to keep the
scale of its asset purchase scheme unchanged at its next meeting.
Philip Rush, UK Economist at Nomura, cited BOE Governor Mervyn
King’s speech on Tuesday evening – in which the official said the MPC
stood ready to do further quantitative easing if recent encouraging
economic signals were to fade – as the chief reason for pulling his
forecast for additional QE in November the day before the GDP data were
Nomura had been predicting more QE in November, which has been the
majority call among analysts, but doubts are mounting about the timing
of further stimulus and King’s guarded, and conditional, comments on the
case for extra stimulus have fueled these doubts.
Rush highlighted the following passage in King’s speech in a
“At this stage, it is difficult to know whether some of the recent
more positive signs will persist. The Monetary Policy Committee will
think long and hard before it decides whether or not to make further
asset purchases. But should those signs fade, the MPC does stand ready
to inject more money into the economy,” King said.
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