Minutes Suggest BoE Set to Dish out Another Serving of Stimulus

(eToro Blog) Earlier today, the Bank of England released the minutes from its most recent policy setting committee, and it appears that the central bank could be set to release another round of quantitative easing. In the end the MPC voted against restarting the gilt purchase scheme by a razor slim margin of 5-4; the Committee hasn’t had a vote that was that close in more than five years, and suggests  to analysts that more QE is a lot closer than previously expected, perhaps even as soon as next month.

According to the minutes the BoE governor, along with policy doves Adam Posen and David Miles, voted for a £50 billion increase in gilt purchase, while Paul Fisher supported an increase of half that amount. Notably, Governor Mervyn King hasn’t voted against the majority in nearly three years but analysts are forecasting that he won’t be in the minority for very long.

Further, the minutes revealed that the MPC members expect inflation to be lower than they had originally estimated; indeed, data published yesterday showed that inflation hit a 2½ year low at 2.8%, allowing the BoE room for more easing. The MPC had decided against easing at their May meeting largely because there were concerns that inflation would fall at a slower pace.

Lastly, the minutes clearly showed that the members are concerned about the fallout from the intensification of the Eurozone crisis, and cautioned that risks had grown as a result which threatened the stability of the financial system.

The GBP/USD pair is trading higher at 1.5730 and sentiment on OpenBook is bullish by a 60/40 ratio. OpenBook guru PPVijayakumar has a 100% holding of the pair in his portfolio which has provided him with a gain of 4.7% for the 27 trades which were executed in the past month, the vast majority of which were long positions. One currently opened long is also in the green. For the week, the guru has a P&L of 13.9%.

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