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Re: New BOE gov doesn't do more "QE"...........
End of QE looms on signals from UK and US
The end of quantitative easing in the Western world loomed closer after both the UK and the US signalled a potential retreat from the controversial crisis policy.
The Bank of England has released the minutes from Mark Carney's first monetary policy meeting.
By Philip Aldrick, and Emma Rowley
9:48AM BST 17 Jul 2013
18 Comments
In the UK, Bank of England rate-setters voted unanimously to leave QE unchanged at £375bn for the first time since October last year and, in the US, Federal reserve chairman Ben Bernanke again hinted that money printing would be slowwed later this year if the economy remains strong.
However, both central banks were clear that the end of QE would not mean the end of monetary stimulus. Minutes to the Bank’s July rate-setting meeting showed that alternatives to QE are likely to be launched as early as August, prompting specuation that rates could be low until 2016.
At the Fed, Mr Bernanke stressed that “a highly accommodative monetary policy will remain appropriate for the foreseeable future” even if QE is tapered off.
Jittery stock markets reacted calmly to the news, in contrast with the wild reaction when the Fed first hinted at “tapering” in June. On Wall Street, the Dow Jones Industrial Average edged 0.2pc higher after Mr Bernanke’s testimony. In London, the FTSE 100 closed up 0.2pc at 6,571.93 points.
Traders and economists expect the US to begin winding down its $85bn-a-month QE programme in September and halt it completely in the middle of next year. But, Mr Bernanke was careful to say that the Fed will respond to the data, and could accelerate the programme if the economy weakened.
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“Because our asset purchases depend on economic and financial developments, they are by no means on a preset course,” he said. The dollar strengthened against most currencies as the Fed’s central forecast remained that growth was gathering momentum.
However, the Bank’s move away from QE encouraged investors to stick with sterling and it matched the dollar, closing unchanged at $1.5181. The benchmark 10-year gilt rose three basis points to 2.29pc as the prospect of more Bank asset purchases diminished.
“I believe we have seen the last of any QE increases, as the mood [in the Bank] seems to be reflecting that of the Fed that the effectiveness of QE may not outweigh the risks, namely asset bubbles and a systemically dangerous mis-pricing of risk generally,” said Nick Beecroft, chairman at Saxo Capital Markets.
Speculation that the West had seen the end of QE came on a busy day of economic releases. Unemployment fell in the three months to May to 7.8pc, compared with 7.9pc in the three months to February. The number of unemployed fell by 57,000 to 2.51m, while those on jobseekers allowance also dropped by 21,200 to 1.48m.
However, the Office for Budget Responsibility warned that another £19bn of austerity would be needed in 2018 to get the public finances in shape for the long-term.
In his first Monetary Policy Committee meeting as Bank Governor, Mark Carney unified the nine members into voting to leave QE unchanged and rates at 0.5pc. Paul Fisher and David Miles had previously been voting with former governor Sir Mervyn King in favour of £25bn extra QE.
Despite the vote, some members believed “further stimulus was warranted”, according to the minutes. The MPC is considering alternatives to QE such as making a commitment to keep rates low – potentially to 2016, some economists said.
“Given the already large size of the asset purchase programme, there was merit in pursuing a mixed strategy with regards to the different policy instruments at the Committee’s disposal,” the minutes read. - Inflation climbs to 14-month high - reaction
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Re: New BOE gov doesn't do more "QE"...........
Is there even any point to listening to this? They're going to say this or that until they no longer can.Comment
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Re: New BOE gov doesn't do more "QE"...........
There must come a point................
MikeComment
Comment