All aboard the QE!
The Bank of England’s Monetary Policy Committee (MPC) resumed quantitative easing again today.
They’ve announced that the Bank of England will purchase £50bn of government fixed interest securities through until November.
The Bank Rate was left unchanged at 0.50%.
This move comes in response to the ongoing recession, a worsening in the global outlook and a marked easing in international commodity prices, including oil.
According to the economists at Lloyds Bank, growth prospects for the near future looks set to be subdued at best.
The MPC is expected to provide further stimulus beyond November with purchases forecast to reach £500bn by end-2013.
Whilst this move is welcomed at a macro level in that it’s designed to promote economic recovery it will inevitable distort the market for UK government bonds. The National Association of Pension Funds has already been very critical of the negative impact that previous bouts of QE have had on annuity rates. Depending on the type of assets the Bank of England will purchase this could just serve to drive down rates further.
Steve Clark