Bank Of England Halts QE After "Potency Questioned"

Tyler Durden's picture

In what may be the most disturbing news of the day, moments ago the BOE announced it is halting its own version of QE3, and capping the asset purchase program at £375 billion after "some policy makers questioned its effectiveness in supporting a recovery that remains lackluster." Could it be that even that peculiar Homo Sapiens subspecies known as "economist" is starting to realize that when applying the same "remedy" time after time to absolutely no avail, and where even the market no longer responds to unlimited injections of liquidity, then perhaps it is time to end said "remedy" altogether? And how long until the voodoo shamans in the dark lit room at Marriner Eccles follow through? Sadly, if Japan, and its 9 (so far) rounds of easing, is any indication, we have a lot more pain to go before what has been glaringly obvious to every hotdog vendor and shoeshine boy is also understood by Economics Nobel prize winners.

From Bloomberg:

The nine-member Monetary Policy Committee led by Governor Mervyn King kept its target for asset purchases at 375 billion pounds ($598 billion) today, ending its third round of quantitative easing. The decision was forecast by 35 of 45 economists in a Bloomberg News survey. The remainder had forecast an increase of as much as 50 billion pounds.

 

Today’s move suggests the London-based central bank may focus on credit-boosting initiatives such as the Funding for Lending Scheme to ignite growth. Increased inflationary pressures may also have prompted policy makers to hold fire even as surveys point to renewed weakness after the U.K. economy surged 1 percent in the third quarter.

 

BOE Deputy Governors Paul Tucker and Charles Bean both suggested in recent speeches that asset purchases may no longer have the same impact on the economy as when first introduced in 2009. At the same time, Martin Weale has questioned whether loosening policy is right with inflation above the central bank’s 2 percent target.

The UK needs more hedonically edible iPads because inflation appears to be an issue:

Inflation was at 2.2 percent in September and King said last month that recent energy costs increases mean it will stay above the goal “well into next year.” Renewed signs of price pressures combined with the third-quarter gross domestic product data and comments from MPC members led banks including Citigroup Inc. and Barclays Plc to abandon forecasts of more QE today.

 

“The widespread expectation of unchanged policy marks a sharp turnaround from forecasts just a few weeks ago that QE would be expanded,” said Chris Crowe and Blerina Uruci, economists at Barclays in London. “This is partly due to evidence of firmer inflationary pressures.”

 

The MPC had new growth and inflation forecasts at today’s meeting, which it will publish next week. Minutes of the meeting, showing how the committee members voted, will be released on Nov. 21.

Finally, since one never says never in Keynesville, it is likely only a matter of time before the insanity returns:

Even with QE halted, the Bank of England still has the FLS, which it set up with the U.K. Treasury and is aimed at boosting lending. The program began in August and as of last month, 30 financial institutions had signed up, including Lloyds Banking Group Plc and Barclays.

 

“QE still has a benefit and those benefits will stay there -- they’re not unwinding any purchases,” said Alan Clarke, an economist at Scotia Capital in London. “And they won’t close the door on it, they’ll leave their options open.”

And now, we look forward to the ECB confirming that when it comes to failed monetary system, for every good cop there is at least one absolutely insane cop.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
JPM Hater001's picture

Well, they both deal with a certain amount of incontinence anyway.

spinone's picture

The purpose of QE is not economic recovery.  It is to give more money to the banks to plug holes in their balance sheets.

Quinvarius's picture

I guess they forgot that QE has only been around to prop up the banks and gov spending.  It was never designed with a transmission method to the economy.  The real question is, what plan will be used to prop up the banks and gov spending after QE?

HD's picture

See, that's where the unicorns come in.

I don't have a Ph.D in economics so I don't understand it myself - but I'm assured by short, bearded economists the world over that it works great.

edifice's picture

Yeah, but, do they come with pixie dust? That's the magic ingredient...

GetZeeGold's picture

 

 

Europe's top export.

orangedrinkandchips's picture

It's like SPAZ (sp) on MEATBALLS......

 

Where he is helping his dad park the car....

"keep coming Dad......keep coming....you got room..BOOM!....STOP DAD!"

 

We have to destroy what we have now before we move on.....

youngman's picture

Just wait a month..this will change..right now the world game is printing......if you quit playing..you lose...they will jump back into the arena soon..probably have a different name though

Sheeple Shepard's picture

From this BBC article
http://www.bbc.co.uk/news/business-20250413

"Indeed, the minutes from the last MPC meeting in October showed that some members thought more QE would be required at some point in the future.

""We are pretty sure that the economy will need more stimulus in the months ahead," said Vicky Redwood of Capital Economics.

"And we do not think that the committee is out of firepower yet.""

They've got the gun locked and loaded but that trigger finger is trembling baby.

ekm's picture

How many times do I have to tell you gentlemen:

QE decisions everywhere in the world are POLITICAL decisions, not economic decisions, since everybody on earth knows they do a lot of harm and have zero advantages for the REAL economy.

As soon as QEs become POLICITALLY harmfull, they will stop them. Period.

virgilcaine's picture

Hopium administered ..Check!.. Now comes the pain.

Racer's picture

Inflation at 2.2%...HUH! Electricity prices are going up at least 10% next month, no doubt council tax will go up more than 'inflation' as well

northerngirl's picture

Why can't TPTB just admit they have no idea of how to fix the mess they created while they were attempting to fix the mess they created?

Racer's picture

More chance of finding living dinosaurs on the moon than that!

Ghordius's picture

well, there was one guy that said something like "we know what to do, but just have no idea how to get reelected if we do it". He also admitted "sometimes, when the things are though, a politician has to lie".

Would you vote for him?

Wakanda's picture
Bank Of England Halts QE After "Potency Questioned"

That is a horse of a different color.  Somebody is evaluating political risks.

Lux Fiat's picture

Someone at BOE could be evaluating survival risks.  If the bond bubble is close to topping, better to stop buying and create a selling opportunity. If this is the case, I would expect the Fed to follow suit shortly. The election is over, after all, and Obama won't be seeking the presidency again.

overmedicatedundersexed's picture

ben will keep the EU going  who do you think is buying the debt?? the FED is the world power of QE..Ben is buying every countries debt but Russia and IRan. the EU pols know Ben has their back.

fijisailor's picture

This won't last.  They'll be back with the QE program in days if not hours

Elmer Fudd's picture

QE keeps banks solvent.  It will continue.  Use your logical head, not your hope filled one.

muppet_master's picture

the brits,

ARE NOT AS "SMART" as the QEorganizer !!! LOL !!!!

They don't want HYPERINFLATION YOU can believe in !!!

They don't want GREECE (RIOTS) YOU can believe in

ZeroPoint's picture

Imagine that. Loose monetary policy and supply side economics do not stimulate growth after all.

Lord Peter Pipsqueak's picture

This is,of course, just pure unadulterated shite. The BofE have no more intention of stopping QE than Obama has of ending Medicare.

The BofE realises, just like the Chairsatan, that QE has a diminishing effect on the real economy, but that is to ignore or completely misunderstand the economy of the Uk today.

Most Brits have grown up like Pavlovian dogs, weaned on the government tit of house price inflation since the 1950's,any conversation in a bar or around a dinner tables results in some schmuck saying -"there is no better investment than houses".They do not understand why house prices have gone up 50 fold since the war, they just know they have and that every time the gun is put to a governments head regarding taking the difficult choices to correct the long term structural problems of the Uk economy or cut interest rates and/or devaluing sterling they will take the latter. There is definitely a tacit agreement between the UK government and the electorate that they have to deliver house price inflation - if not - they are out. Most Brits define their wealth by their house price, the vast majority have no other form of wealth or savings.

So for the BofE to say they are stopping QE is just preposterous. This would mean the UK govt is, in the coming years, in a confident position to reduce the deficit and reduce govt spending -THEY ARENT! - for all the media hysteria about austerity and govt spending cuts -THERE ARE NONE! -Govt spending has never dropped since 2008 and still continues to rise,year on year.

The simple fact is the UK govt and the BofE are terrified of a UK housing market crash since the UK is probably the only country in the west not to have had a major housing crash,prices are down but thanks to QE and zero interest rates(as a result of QE)they haven't fallen to affordable levels.Since UK banks have hundreds of billions of unrealised losses off balance sheet due to losses on derivatives,a house price crash(even after the govt bailouts) would prove to be the final nail in the coffin. The UK govt cannot afford financially or politically another bank bailout,so the future of the UK economy really does depend entirely on FUCKING HOUSE PRICES.

So in the knowledge that the UK economy is poised on a KNIFE EDGE regarding the housing market,would any sane person expect the Bank of England to stop QE and following the course of events, logically,start to unwind its massive Gilts portfolio and then start putting up interest rates to sensible levels????

What do you think?

http://www.dailymail.co.uk/news/article-2222737/Misery-mortgages-paid-FSA-report-reveals-deals-turned-100billion-time-bomb.html

 

THE DORK OF CORK's picture

@Lord

English house prices are a function of external productive capacity - the eurozone mostly which functions as the modern India.

 

GFORCE's picture

There's hope for old blighty yet!

They're saying that QE in its form is done but yes, I'm sure there will be stimulative measures targeted

at other areas and of course, more 'liquidity' when the next panic comes.

Send them victorious... god save our bankers.

dscott8186's picture

Here's a thought, the first major economy that offers "higher" interest rates will ignite and the resulting investor rush will force the makers of imaginary ones and zeros to stop their QEs.  Whatever country is willing to offer a higher and safer rate of return on investment is going to pull out of the Depression first.  This act will then cause many countries to follow suit leaving the US, Japan and Europe holding the bag.  

Socialism always fails when it runs out of other people's money.