BoE Hopes to Head off Economic Deterioration with £50 Billion Easing
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(eToro Blog) Earlier today, the Monetary Policy Committee of the Bank of England announced that it was increasing its asset purchase program to £375 billion from the current £325 billion, which was generally in line with analysts’ expectations. The Bank decided to hold its benchmark rate at the current level of 0.5%.
At the last policy setting meeting, the MPC doves had been outnumbered by only a single vote, but the economic data and the diminished overall outlook over the past month surely was the deciding factor for the fence-sitter. June was among the worst for the U.K. economy in more than three years; mortgage approvals were below expectations as was consumer lending, and the reading for June PMI construction was far below expectations, falling below 50.0, which denote a sector contraction.
It will surely take more than a little easing, however, to restore investor confidence in the U.K.’s banking sector, especially given that a key official of the central bank has become a central figure in one of the largest financial scandals to hit the financial world. Deputy governor Paul Tucker has asked permission to testify to and present his side of the story to the Commons Treasury Committee. The Bank of England has refuted the allegations that they had prior knowledge of Barclays’ Bank staff manipulating LIBOR rates, but the notes of a phone conversation between the then-CEO Robert Diamond and Tucker could suggest otherwise.
The GBP/USD pair had been trading lower ahead of the rate decision, and was recently at 1.5573; sentiment on OpenBook was overwhelmingly bullish with 90% of traders buying against 10% selling.
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