The BOE remains on amber alert ready for green to go on more easing. With Governor King in the vanguard for more quantitative easing, it is less of question of if but when the BOE opens up the sluice gates to more monetary stimulus. The outlook for UK recovery is in a mess thanks to the Chancellor’s stranglehold on growth prospects due to deepening fiscal austerity. There may be a rump of MPC opposition to new QE due to inflation concerns, but worries about a slip into triple trip recession should be concentrating minds now that the BOE will need to do more to bolster recovery prospects. Consumer confidence remains dangerously weak thanks to job loss fears and low wage inflation. Businesses are holding back on new investment. And the Chancellor’s cupboard will be bare in the Budget. It leaves it to the BOE as the only swing producer of extra recovery stimulus ahead. The BOE should have announced new QE measures by mid-year. Sterling may get a temporary fillip from the BOE sitting on its hands right now, but the stage is set for more QE and more pressure on the pound ahead. The pound still looks set to retrace back towards USD1.35-1.40 territory in the next 3-6 months.
Highlights
BANK OF ENGLAND MPC VOTED 6-3 TO KEEP QE TOTAL AT 375 BLN STG IN MARCH; KING, FISHER AND MILES VOTED FOR 400 BLN STG
BOE MPC VOTED 9-0 TO KEEP INTEREST RATES AT 0.5 PCT (REUTERS POLL 9-0)
BOE - RECENT DATA HAS NOT ALTERED ECONOMIC OUTLOOK MATERIALLY, BUT INFLATION OUTLOOK A LITTLE HIGHER
BOE - PROBABLE GROWTH WILL PICK UP OVER 2013, INFLATION LIKELY TO EXCEED 2 PCT FOR MUCH OF NEXT 3 YEARS
BOE - RIGHT TO ACCOMMODATE FIRST-ROUND IMPACT OF WEAKER STERLING ON CPI IF WEAKNESS REFLECTS REAL FACTORS
BOE - STERLING WEAKNESS DUE TO ANY PERCEPTION OF EXCESSIVELY LOOSE POLICY OR WEAKER ANTI-INFLATION COMMITMENT WOULD BE DIFFERENT
BOE - SOME MPC MEMBERS ARGUED FURTHER QE COULD LEAD TO UNWARRANTED DEPRECIATION OF STERLING
BOE - INFLATION EXPECTATIONS CONTAINED BUT MPC WILL CONTINUE TO WATCH THEM CLOSELY
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