BoE expected to inject 25 billion pounds
(30 October 2009 – UK) Economists expect the Bank of England’s Monetary Policy Committee to inject £25 billion (A$45.06 billion) into the quantitative easing scheme after the sixth consecutive quarter of the UK economy shrinking.
A group of 62 economists polled has showed that two-thirds expect the Monetary Policy Committee (MPC) to extend the £175 billion scheme of quantitative easing (QE) at its rate meeting next week.
Primarily debate surrounded whether the MPC would extend the QE scheme by £25 billion or £50 billion, of the votes counted the majority expect £25 billion to be the amount raised.
Figures last week showed that the economy shrank for the sixth consecutive quarter leaving the country entangled in the longest recession on record.
Prior to this, the analysts had predicted that the figures would confirm that the recession had ended and that the MPC would leave the QE limit unchanged.
Richard McGuire, senior fixed income strategist at RBC Capital Markets, said that the bank has been at pains to communicate the fact that doing too much QE is the lesser of the two evils, compared with doing too little.
With the bank having displayed an unexpected appetite for unconventional policy action in August, economists are predicting more rather than less QE, Mr McGuire added.
Mr McGuire has predicted a £25 billion increase from the MPC.
For the limit to be raised the BoE will have to request it from Alistair Darling, the chancellor, as the Treasury has only authorised £175 billion in asset purchases so far.
Primarily debate surrounded whether the MPC would extend the QE scheme by £25 billion or £50 billion, of the votes counted the majority expect £25 billion to be the amount raised.
Figures last week showed that the economy shrank for the sixth consecutive quarter leaving the country entangled in the longest recession on record.
Prior to this, the analysts had predicted that the figures would confirm that the recession had ended and that the MPC would leave the QE limit unchanged.
Richard McGuire, senior fixed income strategist at RBC Capital Markets, said that the bank has been at pains to communicate the fact that doing too much QE is the lesser of the two evils, compared with doing too little.
With the bank having displayed an unexpected appetite for unconventional policy action in August, economists are predicting more rather than less QE, Mr McGuire added.
Mr McGuire has predicted a £25 billion increase from the MPC.
For the limit to be raised the BoE will have to request it from Alistair Darling, the chancellor, as the Treasury has only authorised £175 billion in asset purchases so far.
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