BoE: More action might be on the way - Westpac

Sean Callow, Research Analyst at Westpac, notes that the BoE MPC exceeded market expectations on 4 August and while a cut in the bank rate to 0.25% was widely expected, forecasters were very divided over whether asset purchases would resume.

Key Quotes

“So the pound and UK gilt yields fell steeply on the announcement of the purchase of GBP60bn in gilts, GBP10bn in corporate bonds and a new “Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate”. These are all to be “financed by the issuance of central bank reserves” i.e. quantitative easing or money printing.

More action might be on the way, with “a majority of members expected to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year”, should data print in line with forecasts.”