July 5, 2012 / 11:19 AM / 7 years ago

Instant View - Bank of England restarts QE with 50 billion pounds

LONDON (Reuters) - The Bank of England voted to restart its quantitative easing asset buying programme on Thursday with a 50 billion pounds cash injection into the financial system to haul Britain’s economy out of recession.

Following are analysts’ reactions to the decision:

VICKY REDWOOD, CAPITAL ECONOMICS

“The Monetary Policy Committee’s decision to resume its asset purchases reflects a combination of easing inflation fears and rising growth concerns. We doubt that this 50 billion pounds of extra quantitative easing (QE) will be the last extension either.

“We think that the MPC will give the economy even more support in the coming months in order to get the recovery back on track and prevent a significant undershoot of the inflation target.”

PHILIP RUSH, NOMURA GLOBAL ECONOMICS

“By merely matching market expectations the MPC has failed to deliver the “shock and awe” it normally aims for when easing policy.

“Nonetheless, it has ensured that the programme contains sufficient ammunition to continue its aggressive campaign until it can be reviewed as part of the forecast round for the November Inflation Report.

“The MPC naturally reserves the right to change course at any time and will review the programme each month, but November will nonetheless be the key meeting. We expect QE3 to be extended by 25 billion pounds then.”

PAUL ROBINSON, HEAD OF EUROPEAN FX RESEARCH, BARCLAYS:

“This is mildly positive for sterling. Even though 50 billion was the consensus forecast quite a few people saw a risk of it being greater than that. Some people were thinking they might cut the actual interest rate for the first time in a long time.

“So even though they have loosed, relative to expectations it’s slightly less than some people were looking for. The appreciation in sterling since then is consistent with that.

“What really matters going forward is what the ECB does.”

JAMES KNIGHTLEY, ING

“This was the widely expected outcome, although the BoE do state that this will be over four months, rather than three so it is a slightly slower pace of government bond buying.

“This presumably reflects the fact that the Debt Management Office has said they will not be issuing gilts over the Olympic period due to fears over failed issues because of a lack of traders working.

“We continue to have doubts over how successful extra QE will be, but seeing as the BoE has few other options we expect them to stick with it.”

ADAM CHESTER, LLOYDS

“The announcement is in line with what the markets were expecting. We think it is the next step in a series of measures they are set to undertake over the next 12-18 months in an effort to try to stimulate the economy.

“It suggests the Bank of England has underlying concerns that growth is flagging and they need to do something about that.”

PETER DIXON, COMMERZBANK

“I am of the opinion that by giving the banking sector more gilts they are actually increasing their liquid assets and making their position that much more secure. I don’t think it’s about inflation any more, it’s about stabilising the economy.”

ROSS WALKER, RBS

“There isn’t anything I can see in the statement that is particularly surprising. It’s fairly gloomy, there’s an implicit dovish bias persisting in terms of their policy stance. We think the vote will be 9-0.

“Overall there’s a dovish bias here and we could easily see further loosening in November. A lot will depend on the external environment.”

BRIAN HILLIARD, SOCIETE GENERALE

“(It was) as expected by us and the market. I think there was more uncertainty about the size of QE than there was about moving the bank rate. I note that they are going to take four months to complete the programme.

“They are probably making the purchases at a slower rate than previously. We wait from the minutes to see whether there is any significant risk of them doing more in due course.”

VICTORIA CLARKE, INVESTEC

“We had considered there to be a risk that we would see bigger uplift - perhaps 75 billion particularly given the weakness of the services PMI earlier in the week. But the fifty billion was very much in line with our view.

“Looking at the statement, the reasons are largely as expected as well. They seem a bit less worried about price pressures and seem to be certainly more worried than they were in May about some of the weaker global economic backdrop and also the ongoing risks from the euro crisis.”

UK Economics Desk

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