PREVIEW: BOE to keep rates at record low of 0.50%, uncertainty about whether QE working
First Published Friday, 10 July 2009 from Need to Know News
Bank of England (BOE) policy makers are expected to keep the UK base rate at its record low of 0.50% given uncertainty about whether its more aggressive, untraditional easing methods are actually working in the real economy.
The BOE's Monetary Policy Committee (MPC) will announce its monthly decision on rates and any plans on 'quantitative' easing at 1200pm BST on Thursday, June 4.
Need To Know News will broadcast the BOE decision live.
At its May meeting, the MPC's discussions didn't even tought on whether to move rates at all, the minutes showed. This reinforces expectations that rates have troughed.
However, it's much too premature to even entertain the idea of rate hikes.
While UK data on the services, housing and mortgage front have shown mild improvement, the bounces are off extremely low levels and will likely to be treated with caution in MPC discussions over the next two days.
And both the minutes of the MPC's May meeting and its recent quarterly inflation report expressed much concern about the viability of any economic recovery.
The bank still believes consumer price inflation will undershoot its 2% target on a two-year horizon.
And in its most recent lending report on Tuesday, bank lending to corporations and households was still sluggish in April, despite embarking in March on a 75 billion-programme to buy gilts and commercial paper.
That amount was increased last month by 50 billion to a total of 125 billion, with another three month extension.
The MPC also agreed last month to ask Governor Mervyn King to request from the Chancellor an increase in that upper limit 'should economic conditions require it.'
Most economists are not looking for yet another increase in QE at the June meeting. The current ceiling is 150 billion.
However, economist Brian Hilliard of Societe Generale believes there is a chance the MPC could upp the size of QE on Thursday due to continued tightness in credit.
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