BoE Boosts QE to £275B in Largely Unexpected Move
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The Bank of England has increased quantitative easing by £75 billion to £275 billion, the Bank said Thursday.
Many might be surprised by the move, the Financial Times notes, as many were expecting further moves by the BoE to be delayed until the Bank could update inflation and growth forecasts.
Thomson Reuters reported in a recent survey economists expected only a 40 percent resumption in October of QE.
However, the BoE said renewed global economic "tensions" have forced the resumption to QE. BoE comments, "The pace of global expansion has slackened, especially in the United Kingdom’s main export markets. Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally. These tensions in the world economy threaten the UK recovery.'"
The FT points at recent surveys of economic activity (manufacturing, construction, and services) which may not have been as weak as it was in the first half.
Recent data from the Office for National Statistics said U.K. GDP stood at 4.4 percent below its pre-recession peak. The initial number came in at 3.9 percent. First-half growth in the U.K. was also only 0.5 percent, lower than the 0.7 percent originally thought.
So, there you have it. With major trading partners of the U.K. experiencing massive weakness and banks scrambling for ways to raise cash, the BoE had no other choice to boost QE.
Many might be surprised by the move, the Financial Times notes, as many were expecting further moves by the BoE to be delayed until the Bank could update inflation and growth forecasts.
Thomson Reuters reported in a recent survey economists expected only a 40 percent resumption in October of QE.
However, the BoE said renewed global economic "tensions" have forced the resumption to QE. BoE comments, "The pace of global expansion has slackened, especially in the United Kingdom’s main export markets. Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally. These tensions in the world economy threaten the UK recovery.'"
The FT points at recent surveys of economic activity (manufacturing, construction, and services) which may not have been as weak as it was in the first half.
Recent data from the Office for National Statistics said U.K. GDP stood at 4.4 percent below its pre-recession peak. The initial number came in at 3.9 percent. First-half growth in the U.K. was also only 0.5 percent, lower than the 0.7 percent originally thought.
So, there you have it. With major trading partners of the U.K. experiencing massive weakness and banks scrambling for ways to raise cash, the BoE had no other choice to boost QE.
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