New BOE MPC member Posen downplays the idea that QE will inevitably lead to inflation, saying their is no evidence of that in history. He says that QE might be more effective if it were increased beyond gilts. (Corporates would be the most likely suspects, I guess…) The structure of the UK banking system argues poorly for a sustained economic recovery, he says, saying there is not enough competition to provide sufficient lending to business.
Cable is coming lower again, down below 1.6300 on the dovish comments. This after a squeeze to almost 1.6400 this morning as the market got very short Cable in anticipation of dovish remarks from Posen and more QE at the November MPC meeting after appalling weekend press on the UK economy. That sound you hear is stopped-out cable shorts knocking their heads against the wall.
EUR/GBP is getting a minor lift from the comments, up to 0.9113 helping slow the EUR/USD descent relative to the slide in cable.
