BOE could launch further QE in order to keep rates low

Graham_Devon

Does this not go against every rule in the "book" as it were?

Launching further QE purely in order to devalue sterling and keep interest rates down (thereby purposely increasing inflation) appears to be one fiddle too many?

It comes after Carney's forward guidance had the reverse effect as to what was expected. Instead of devaluing the currency, it appears to have bolstered it.

Apparently the market is "undermining" the BOE's efforts to force the markets to step into line.

However, first they could remove the link to employment, as put simply, it didn't work how they wanted it to...showing just how fickle ths forward guidance actually is.

Since the Bank unveiled its new unemployment threshold and signalled that it did not forsee any rate rises until the second half of 2016, markets have surprisingly ignored the guidance.

Mr Clarke said: “The Bank issued forward guidance to nurture the recovery. If the market undermines it, I don’t think they’ll hesitate to send more smoke signals out at the very least, or flex their muscles and do more QE. If the Governor moves, he’ll probably bring several of the committee with him.”

Kevin Daly, UK economist at Goldman Sachs, added: “ We expect that the MPC will want to reverse this move, first with stronger communication and, if this doesn’t work, potentially with additional policy action.”

This is pure manipulation, is it not?

Will the markets really take kindly to being manipulated? What about we, the nationm who could suffer the consequences or markets turning their backs on us?

http://www.telegraph.co.uk/finance/bank-of-england/10241750/Mark-Carney-may-have-to-relaunch-QE-to-keep-down-interest-rates.html

lvader

They don't have to do anything to keep interest rates low, they set the rate!

Graham_Devon

lvader wrote: »

They don't have to do anything to keep interest rates low, they set the rate!

But the government borrowing costs are rising. It's unsustainable. They can't carry on ignoring the need to raise rates. Unless they just pump QE into the system to manipulate pretty much everything.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Does this not go against every rule in the "book" as it were?

No.

The BOE write the "rule book".

They can change the rules whenever they like.

Central banks are the most powerful financial entities on earth.

There's a reason the saying "don't fight the fed" exists....

chucky

Graham_Devon wrote: »

It's unsustainable. They can't carry on ignoring the need to raise rates

No.

It's only unsustainable to people who's blinkered perverse viewpoint only sees raising BOE rates as the only option for the Bank of England

lvader

Graham_Devon wrote: »

But the government borrowing costs are rising. It's unsustainable. They can't carry on ignoring the need to raise rates. Unless they just pump QE into the system to manipulate pretty much everything.

Bond yields will certainly go up because the deficit is still very large and thats a lot of debt to shift. I don't see why they would need raise rates though. Lots of high yields in Euope but the ECB keeps the rate very low regardless.

HAMISH_MCTAVISH

Graham_Devon wrote: »

But the government borrowing costs are rising. It's unsustainable.

The BOE can lower those costs at will by relaunching QE and purchasing bonds.

Increased demand for bonds will raise the price and lower the yield, reducing govt borrowing costs.

They can't carry on ignoring the need to raise rates.

What need?

The BOE has stated the conditions under which rates will rise.

Those conditions are not met, so rates won't rise.

Simple as that.

Unless they just pump QE into the system to manipulate pretty much everything.

Central banks have unlimited financial firepower.

They'll do what they please, when they please.

nicko33

HAMISH_MCTAVISH wrote: »

Central banks have unlimited financial firepower.

oh good. We don't have to worry about anything ever again then. They can just print off a few trillion and we can ignore the deficit and the national debt.

System

HAMISH_MCTAVISH wrote: »

Central banks have unlimited financial firepower.

Just like the Americans in Vietnam then. Unlimited firepower, but they still lost when faced with reality.

Graham_Devon

HAMISH_MCTAVISH wrote: »

The BOE can lower those costs at will by relaunching QE and purchasing bonds.

Increased demand for bonds will raise the price and lower the yield, reducing govt borrowing costs..

Yes, that's what the thread is about Hamish. But thanks for informing us again.

The question is whether it is "acceptable" to do such a thing.

Afterall, what do you do next time we hit the same problem (which will happen). More QE again?

chucky

HAMISH_MCTAVISH wrote: »

What need?

The need for rates to go up so that those who complain about it being 'unsustainable' can hopefully see families be repossessed and suffer so they can buy a cheap house at their expense.

Most don't understand the dynamics but still like to rattle off a few soundbites to self justify their own financial position blaming others instead of their own misfortunes.