–Upscaling Of QE In Feb Seen Inevitable Given Data Deterioration
LONDON (MNI) – The Bank of England Monetary Policy Committee
produced no surprises at its December meeting, leaving Bank Rate on
hold at 0.5% and the total stock of QE at stg275bn.
The BOE is widely expected to extend QE in February when its
current gilt-buying programme of stg75bn expires.
BOE Governor Mervyn King had signalled that the MPC would want to
wait and see more evidence that inflation would fall in line with its
November Inflation Report forecast before raising the stock of QE above
stg275bn.
Despite a forecast for 1.3% forecast for CPI inflation in 2 years,
King said that adjusting QE to steer it back to the 2% target would
amount to ‘fine-tuning’ given the scale of the present inflation
overshoot compared to past forecasts.
An increase in QE looks increasingly inevitable. Markit/CIPS PMI
surveys released over the past week as well as October production data
suggest that the manufacturing sector is already in recession while the
more dominant services sector is only seeing weak growth.
Many investment banks have already reined in their forecasts for
2012 growth as result and analysts are agreed that growth in the next
months will be stagnant at best and that a new recession is likely in
the next few quarters.
The Organisation for Economic Cooperation and Development has
forecast that the BOE would need to raise the total stock of its gilt
purchases to stg400bn in early 2012 in order to bring inflation back to
target in the medium term, slightly to the high side of the average
forecast by City analysts.
–London newsroom: 4420 7862 7492 email: ukeditorial@marketnews.com
[TOPICS: M$B$$$,M$$BE$,MT$$$$]
