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Bank of England to stay on autopilot until Feb
inspector_monkfish
Posts: 9,276 Forumite
06:55 07Jan10 - Bank of England to stay on autopilot until Feb
* WHAT: Bank of England monetary policy decision
* WHEN: 1200 GMT, Thursday Jan. 7
* UK rates to stay at 0.5 percent, QE target at 200 bln stg
* QE gilt buying likely to end in Feb if recovery cemented
* Rates to stay at record low until late 2010
LONDON, Jan 7 - The Bank of England is unlikely to tamper with its monetary policy settings on Thursday, but growing signs Britain has pulled out of recession mean it is expected to halt its quantitative easing programme next month.
The Bank's Monetary Policy Committee voted unanimously in December to leave interest rates at 0.5 percent and to keep its target for asset purchases -- the bulk of which have been gilts -- at 200 billion pounds ($320 billion).
The BoE is on track to complete the last of these gilt purchases just before its February meeting, by which time it will also have fourth-quarter GDP data and new growth and inflation forecasts to hand.
"The Monetary Policy Committee is likely to wait for February's inflation report before reviewing its asset purchase programme," said Vicky Redwood at Capital Economics.
Since it exhausted its conventional monetary firepower in March by cutting rates to 0.5 percent and began buying gilts, the MPC has only ever tweaked policy in months that coincide with its quarterly projections.
Preliminary Q4 figures due later this month are expected to confirm the economy returned to growth at the end of 2009, but economists are split on the extent to which the economy will maintain traction over the course of the coming year.
Recent activity indicators have been encouraging. Britain's manufacturing and services sectors are growing at their fastest pace in two years, and money supply growth and bank lending both picked up at the end of last year.
But consumer confidence fell in December and analysts warn that headwinds to recovery remain, not least a record government deficit which will require deep cuts to public spending in the coming years.
Such a backdrop has convinced most economists that British interest rates will not rise until the second half of this year at the earliest.
"It's one thing to bring an end to quantitative easing, another to start raising rates," said David Owen, chief European financial economist at Jefferies. "What remains to be seen is how much of the recovery has been led by an upturn in the inventory cycle. Our view is that the BoE will hold rates at 0.5 percent for the whole of the year."
* WHAT: Bank of England monetary policy decision
* WHEN: 1200 GMT, Thursday Jan. 7
* UK rates to stay at 0.5 percent, QE target at 200 bln stg
* QE gilt buying likely to end in Feb if recovery cemented
* Rates to stay at record low until late 2010
LONDON, Jan 7 - The Bank of England is unlikely to tamper with its monetary policy settings on Thursday, but growing signs Britain has pulled out of recession mean it is expected to halt its quantitative easing programme next month.
The Bank's Monetary Policy Committee voted unanimously in December to leave interest rates at 0.5 percent and to keep its target for asset purchases -- the bulk of which have been gilts -- at 200 billion pounds ($320 billion).
The BoE is on track to complete the last of these gilt purchases just before its February meeting, by which time it will also have fourth-quarter GDP data and new growth and inflation forecasts to hand.
"The Monetary Policy Committee is likely to wait for February's inflation report before reviewing its asset purchase programme," said Vicky Redwood at Capital Economics.
Since it exhausted its conventional monetary firepower in March by cutting rates to 0.5 percent and began buying gilts, the MPC has only ever tweaked policy in months that coincide with its quarterly projections.
Preliminary Q4 figures due later this month are expected to confirm the economy returned to growth at the end of 2009, but economists are split on the extent to which the economy will maintain traction over the course of the coming year.
Recent activity indicators have been encouraging. Britain's manufacturing and services sectors are growing at their fastest pace in two years, and money supply growth and bank lending both picked up at the end of last year.
But consumer confidence fell in December and analysts warn that headwinds to recovery remain, not least a record government deficit which will require deep cuts to public spending in the coming years.
Such a backdrop has convinced most economists that British interest rates will not rise until the second half of this year at the earliest.
"It's one thing to bring an end to quantitative easing, another to start raising rates," said David Owen, chief European financial economist at Jefferies. "What remains to be seen is how much of the recovery has been led by an upturn in the inventory cycle. Our view is that the BoE will hold rates at 0.5 percent for the whole of the year."
Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)
(MSE Andrea says ok!)
0
Comments
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inspector_monkfish wrote: »Recent activity indicators have been encouraging. Britain's manufacturing and services sectors are growing at their fastest pace in two years, and money supply growth and bank lending both picked up at the end of last year.
But consumer confidence fell in December and analysts warn that headwinds to recovery remain, not least a record government deficit which will require deep cuts to public spending in the coming years.
Such a backdrop has convinced most economists that British interest rates will not rise until the second half of this year at the earliest.
The above appears a little contradictory to me?
I thought we were all going shopping mad in december, for christmas, sales bargains, beating the vat rise and so on. So how come consumer confidence fell?
As a side issue, as this is a long month, couldn't they print an extra £1k & forward it to my bank account. I'm a little short this month & it'd tide me over!It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
Bank of England on auto-pilot until Feb, then what ?......with inflation on the rise how dumb are they going to look when they just can't stop themselves pressing the PRINT button again.
Ah yes I forgot, they've already said it will a temporary spike.:rolleyes:0 -
lemonjelly wrote: »The above appears a little contradictory to me?
I thought we were all going shopping mad in december, for christmas, sales bargains, beating the vat rise and so on. So how come consumer confidence fell?
Measures of shopping, etc, are backwards indicators. So, we were doing well in december. Measures of confidence are asking what people think it's going to be in the future. They often fall at christmas, because lets face it january ,feb and march are the worst months of the year for most businesses.“The ideas of debtor and creditor as to what constitutes a good time never coincide.”
― P.G. Wodehouse, Love Among the Chickens0 -
Measures of shopping, etc, are backwards indicators. So, we were doing well in december. Measures of confidence are asking what people think it's going to be in the future. They often fall at christmas, because lets face it january ,feb and march are the worst months of the year for most businesses.
Aha! well put.
& of course there is the fact this is a 5 week month (6 weeks between paydays for many who recieved wages a week early in december!)
Plus, we're less likely to be out shopping in this weather, or spending money (except on heating). So the high street should be quieter.It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
inspector_monkfish wrote: »* Rates to stay at record low until late 2010
So 0.5% until the last quarter by the look of it.
Should I use the line wait until the conservatives get in.
(seem like we have to every time low rates are mentioned.) 0 -
inspector_monkfish wrote: »that British interest rates will not rise until the second half of this year at the earliest.
this one thinks very differently and it seems he has a good track record on forecasting these things.0 -
this one thinks very differently and it seems he has a good track record on forecasting these things.With preliminary fourth-quarter GDP [economic growth] figures released in late January likely to confirm a recovery, and inflation rising sharply, the model suggests that Bank Rate could be increased as early as March," Henderson said
BOE have already said they expect it to go over 3% and fall back and undershoot.
I don't think the BOE will change it for a blip they have forecast which will be temporary even without a rate change..
So unless it is over 3% for a few months with no signs of coming down they will not do a knee jerk reaction.
They will be worried about the recovery and I am sure will want to post two quarters of growth before they do anything. Just in case they derail it.0 -
Actually, with confidence falling, plus a long gap between paydays, & possibly with a contribution from the weather (depending on how long this freeze lasts) I'm already wondering if inflation will reach as high as 3%?
I'm just wondering if post christmas excesses might lead a few households to run their stocks down, kinda like business' did last year?It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
this one thinks very differently and it seems he has a good track record on forecasting these things.
really cant see a hike as soon as next month.
that would come as a massive surprise to the markets, when you got 2mth libor down at .54 and 3mth at .61
i'm still sticking with end of the year, if at all
unless i see info in the meantime that makes me think otherwise Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)0
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