BOE Maintains QE as Inflation Concerns Override New Freedom

Bank of England policy makers kept their stimulus program on hold as concern about dislocating inflation expectations overrode new freedoms given by a change to their remit.

The nine-member Monetary Policy Committee led by Governor Mervyn King maintained the target for asset purchases at 375 billion pounds ($565 billion) in London today, a move forecast by 34 of 37 economists in a Bloomberg News survey. The decision may mark a third consecutive defeat for King if he kept up his push for a 25 billion-pound increase.

Today’s meeting was the first since Chancellor of the Exchequer George Osborne expanded the MPC’s flexibility, broadening its capacity to ease policy even with above-target price gains. Still, a report today showed services unexpectedly strengthened in March and some MPC members have raised concern more stimulus could unhinge confidence in their inflation commitment.

“Inflation is likely to remain at elevated levels in coming months,” said Joost Beaumont, an economist at ABN Amro Holding NV in Amsterdam, who forecasts no further QE. “Meanwhile, the economy is likely to emerge from a triple dip, starting a modest but sustained recovery. The economy would need to take a turn for the worse before a majority of the MPC will vote for more gilt buying.”


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell