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Thursday, August 11, 2011 1:41:13 PM
BoE Worried About Growth
* Thursday, August 11, 2011
The Bank of England (BoE) believes that inflation will peak by the end of the year and that sluggish growth is now the main threat.
Despite the huge inflation overshoot at the moment, the BoE is now less concerned about inflation than about growth. The release of the quarterly inflation report this week noted that “on balance…inflation is about as likely to be below as above target in the medium term” whereas “growth is likely to remain sluggish in the near term, reflecting the continuing squeeze on households’ real incomes.” Slowdowns in Europe and the U.S. are exacerbating the downside risks. The BoE believes that the path of inflation is still upwards in the near term, reaching 5%, but that it will fall back “in the medium term as the impact of the factors raising inflation diminished and some downward pressure from a degree of slack in the labor market persisted.” Though the report shied away from suggesting that a further round of quantitative easing (QE) is pending, the Monetary Policy Committee’s Paul Fisher recently made it clear that it “is still very much on the table as one of our potential policy actions and it’s certainly not ruled out … people need to be aware of that.” Given that broad money supply is now shrinking, we believe that further QE is almost inevitable within the next 9 months.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110811.GIF
George.
Click on "In reply to", for Authors past commentaries.
* Thursday, August 11, 2011
The Bank of England (BoE) believes that inflation will peak by the end of the year and that sluggish growth is now the main threat.
Despite the huge inflation overshoot at the moment, the BoE is now less concerned about inflation than about growth. The release of the quarterly inflation report this week noted that “on balance…inflation is about as likely to be below as above target in the medium term” whereas “growth is likely to remain sluggish in the near term, reflecting the continuing squeeze on households’ real incomes.” Slowdowns in Europe and the U.S. are exacerbating the downside risks. The BoE believes that the path of inflation is still upwards in the near term, reaching 5%, but that it will fall back “in the medium term as the impact of the factors raising inflation diminished and some downward pressure from a degree of slack in the labor market persisted.” Though the report shied away from suggesting that a further round of quantitative easing (QE) is pending, the Monetary Policy Committee’s Paul Fisher recently made it clear that it “is still very much on the table as one of our potential policy actions and it’s certainly not ruled out … people need to be aware of that.” Given that broad money supply is now shrinking, we believe that further QE is almost inevitable within the next 9 months.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110811.GIF
George.
Click on "In reply to", for Authors past commentaries.
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