Knee Jerk Responses To BOE "Aggressive" QE Expansion

Tyler Durden's picture

Reuters summarizes the immediate responses from Wall Street on the BOE's surprising and substantial QE expansion.


"I think we see the Bank trying to step in to bail out the government but the problem is with interest rates so low, with confidence depressed, it's very hard for monetary policy to make a difference.

"It's like pushing on a string and it's harder because this time the Bank is trying to support growth but fiscal policy and the government's budget decisions, are actually making it harder; they are depressing growth and confidence through contraction. The real change we need is for the chancellor and David Cameron to say we are getting fiscal policy wrong, we are going too fast, to slow the pace of deficit reduction, to listen to the IMF and to others."


"I think it's the right thing to do, I think they will do lots more QE. What is important is they are moving ahead of consensus and that is likely to have a fairly powerful downward effect on yields, which is what they want to achieve. And they will go on doing QE until prospects for the economy improve significantly, or until they own the whole gilt market."

"He said his 'best guess' was the Bank of England would do 300 billion pounds of QE on top of the 200 billion done so far, bringing the cumulative amount to 500 billion. "Today's 75 is part of that 300. But that's only a rough guess and the key point is it is going to come in large scale."

"It's both that the economy is weak but also that the MPC's view is that QE is not a very powerful tool, or rather it takes a large amount of QE to have much effect on the economy. I think that in the markets people don't appreciate that what comes from that is that the MPC will use QE in a very large scale because it is only in very large scale that QE has a notable effect."


"As government policies are running the economy into the ground, the Bank of England is right to resume quantitative easing.

"But while it is better than not doing anything, quantitative easing is no economic magic wand.

"We worry that it does more to help the finance sector than the rest of the economy and could fuel further inflation at a time when living standards are already being squeezed."


"With the risks to the economic outlook increasing, the MPC has acted promptly by extending quantitative easing this month.

"This measure will help support confidence, but we need to recognise that its impact on near term growth prospects is likely to be relatively modest.

"Only once the turmoil in the euro zone is resolved will confidence be fully restored."


"The Committee finally recognises that the major threat to the UK is renewed recession, not inflation. But previous experience suggests that the positive impact on the economy is likely to be modest.

"The accompanying statement put emphasis on the implication that there is more slack in the economy than previously thought. Unless the news on the economy improves markedly very soon, it seems unlikely that the MPC will conclude in four months that it has done enough.

"It would be optimistic to hope that the launch of QE2 will significantly brighten the outlook for the economy. The risks of recession remain alarmingly high."


"By making purchases over four months, (the BoE) has afforded itself the forecast round for the February Inflation Report to calibrate and communicate its next response.

"Meanwhile by ramping it up to 75 billion pounds, the MPC has delivered 'shock and awe' and given itself enough ammunition to maintain a high run rate of gilt purchases.

"Purchases should be aimed at conventional gilts further out the curve than last time, owing to pre-existing ownership stakes and the MPC's perception of where it has the greatest potential to reduce yields.

"We still expect the MPC to follow through with a further £25bn of asset purchases when it reassesses its forecasts in February. We also think the impact of these purchases will disappoint relative to the Bank's estimates of QE1's impact. Our working assumption is that the price level will be raised by about 0.5 percent but the impact on real activity is only about half that."


"What did we want? More QE. When did we want it? Now.

"Near zero GDP and money supply growth made a compelling case, and the Bank of England was right to launch QE2.

"It could be argued that the Bank of England was slow to introduce QE the first time, but thankfully it hasn't made the same mistake twice."


"This latest 75 billion pounds increment should be considered the next downpayment on stability, rather than the last word on QE.

"And we would not be surprised to see the total asset purchase spend rise to 500 billion pounds, with this round of QE starting with today's 75 billion pounds eventually adding a further 300 billion pounds to the QE1 total.


"The fact that the MPC chose to act now on QE and to go for 75 billion pounds rather than 50 billion pounds reflects the fact that they believe an already difficult outlook for the economy has deteriorated amid mounting domestic and global headwinds.

"The MPC expects the new programme of QE to take four months to complete. We suspect that further QE will then be extended further in the first quarter of 2012.

"However, it seems unlikely that the Bank of England will take interest rates any lower than 0.50 percent, although the minutes of the September MPC meeting indicated that they reviewed this option.

"It is apparent though that any interest rate hike has disappeared into the horizon. Indeed, we do not expect any increase in interest rates before 2013."


"With growth revised downwards yesterday, pumping more money into the economy through quantitative easing is welcomed.

"However, it is important that in an attempt to boost short-term demand that small businesses can directly benefit from this cash injection and that the banks use it to decrease the cost of credit and to increase the availability of lending.

"While the introduction of credit easing aims to give small businesses access to credit, we also need to see a commitment to keep interest rates low until the economy has seen a prolonged period of growth."


"They've taken a fairly aggressive step. That they've moved with 75 billion (pounds) is indicative of the scale of the uncertainty and the strains they are feeling in the global markets ... This shows the BoE will be aggressive from this point forward.

"Clearly it's a net negative for sterling."


"It's a good injection of capital. We now just need to see a coordinated effort from the rest of Europe to sort out the recapitalisation of European banks and it should form a decent base to move forward.

"It takes away quite lot of risk. This is positive for the market."


"The MPC has chosen to waste no further time in injecting additional stimulus into the flagging recovery in the face of a rapidly deteriorating economic environment."

"With business and consumer confidence hit by austerity measures



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Harlequin001's picture

and yet they tell us it's for our benefit and they act like it's a good thing. Stop it you arseholes, you are ruining the country!


"It's a good injection of capital....' It's not capital if it is merely printed money. It is stealing from every English citizen.

jekyll island's picture

Well, based on the US results this should probably create about 750 jobs, so it's got to be good, right? 



Harlequin001's picture

At least one, to drive us all down to the unemployment office on the bus when they're done...

BigJim's picture

It's exactly this that convinces me we're in for an inflationary or even hyper-inflationary future, at least in terms of stuff not bought on credit.

This is just the beginning of the endless printing we'll see throughout the West until the debt has been diminished as a proportion of GDP.

TradingJoe's picture

It tells me for sure they are in deep shitto and in my book its a net negative!!! Short term shot in the arm! But i'll take it!

Sancho Ponzi's picture

Exchanging bonds of (x) duration for bonds of zero duration does NOTHING to stimulate an economy. There is no stimulus effect that results from an asset swap of equal value. These central bankers have no clue what they are doing and should be immediately sacked.

Racer's picture

They cut pensioners winter fuel allowance by 25% that pays for fuel that has gone up 30 or more %

Yeah more QE helps the economy of rich banksters only

earnulf's picture

Please Sir, May I have another lump of coal for the furnace?

Harlequin001's picture

You certainly can sir, providing you can afford to buy it.

If not, you can sod off!

ZeeGerman's picture

Printing will not save your sorry fat asses! it will just give you enough to fuel the rolls one last time...

jekyll island's picture

The credit deflation hurricane is just offshore and about to make landfall.  QE is the only weapon they have, so of course they are going to use it.  BOE and Gov't more interested in their self preservation than doing what is best for the country.  

Tense INDIAN's picture

one of the early fake revolution to be hitting ur country ...beware...

PaperBear's picture

"capital" ?

No, debt.

JR's picture

The Fed Twists, the Market Shouts by Ron Paul | October 6, 2011

Last week the Federal Reserve began the second incarnation of "Operation Twist", an attempt to drive down interest rates by purchasing long-term Treasury debt and selling short-term debt. This is just the latest instance of the central bank desperately flailing around doing something merely for the sake of doing something. Fed officials still do not understand – or admit – that the Fed itself caused the financial crisis by driving interest rates too low and relentlessly expanding the money supply. Thus, this latest action will just exacerbate the problem.

Markets, however, understand that the Fed has failed and has no clue what it is doing. This is why markets went into a tailspin after the Fed's new strategy was announced. Stock, bonds, and commodities dropped in price while the financial press wondered whether this worldwide sell-off meant that the entire system was collapsing. Not since 2008 had there been such a dramatic drop across so many different sectors of the market.

Because of continued rising inflation and the Federal Reserve's suppression of interest rates, investing in traditional safe havens such as savings accounts, mutual funds, and Treasury bonds has become unprofitable. Lots of money is moving through the system seeking a return on investments or at least some measure of safety, as increasingly desperate investors move their funds around in search of long-term profits and stability. Until the Fed stops its monetary intervention and allows interest rates to be set by the free market, investors will move their money in a volatile manner. They will invest in commodities and stocks while prices swing upwards, but will flee to bonds and cash at the first sign of a downturn

The uncertainty caused by the Fed does help some people – professional traders on Wall Street for example. Increased volatility and huge price swings mean more opportunities for profit, as sophisticated electronic trading programs can buy and sell huge positions within a fraction of a second of a major market movement. But small businessmen are misled by the artificially low interest rates into making unwise investments, and those whose jobs vanish when the Federal Reserve's latest bubble pops suffer. Without the knowledge or ability to move with the markets or diversify overseas, average Americans see their savings stagnate or depreciate – along with their hopes and dreams for a better tomorrow.

The only way to return to a sound economy is for the Federal Reserve to cease and desist its monetary manipulation and allow interest rates to be determined by markets, just as the price of goods, services, and labor should be determined by markets. Everything the Fed is doing by pumping money into the economy benefits only the insolvent, too-big-to-fail banks. Low interest rates encourage consumers to take on more debt, meaning more profits for the banks issuing those loans. Purchasing mortgage-backed securities, as the Fed has done, keeps housing prices inflated, helping the banks who have non-performing mortgages on their books. However, it hurts consumers who continue to be priced out of the housing market. In order to maintain a decent standard of living for the American people and to restore the vibrancy of the U.S. economy, it is time to end the Fed.

LongSoupLine's picture

Ron Paul is off on 1 point.  The Fed knows exactly what it's doing, and does have a "clue".  However, their clue and direction is NOT in the best interest of American taxpaying middle class, employment, or the strength and longevity of the US Dollar.

End the Fed, Arrest Bernanke, his "board", Geithner, and all domino effect members of Congress, Justice and "Regulatory" agencies associated with the oversight as well as protection of America.  Following arrest, Charge with Treasonous acts against the American people and America's sovereign security, and/or willful negligence of duty resulting in safety and security endangerment of America and it's citizens.

 PRESIDENT WOODROW WILSON: "A great industrial Nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the Nation and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world - no longer a Government of free opinion no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men". (Just before he died, Wilson is reported to have stated to friends that he had been "deceived" and that "I have betrayed my Country". He referred to the Federal Reserve Act passed during his Presidency.)

pelagivore's picture

Yep, more QE than expected so of course the market should be euphoric... but wait, doesn't QE mean the that systemic risks are much larger than expected? Doesn't more QE mean that monetary authorities really don't have a clue? Does QE really work? We need more Keynesians to get us out of this mess. 

Racer's picture

Petrol and diesel near all time highs, food costs soaring, heating, water and all other bills going up way above inflation. wages not going up, cuts  cuts cuts..

yeah QE ahead and kill the economy what's left of it

Harlequin001's picture

Deflation my friend is a terrible thing, if only one could find it...

chump666's picture

great job, BOE!  you just sent a wave of oil inflation back into Europe.  Now we look forward to the protests/riots going into winter.

asia is gonna love this...stagflation crash in realtime

SpaDe's picture

Short term fix for a long term problem seems to be the running modus operandi.

SpaDe's picture

Dbl post..............

msmith's picture

The USD is setting up for weakness ahead.  A look at the USD Index and the EURUSD.

chump666's picture

also they (BOE) just KO'ed UK bonds and GBP, nice work.  UK is heading towards a fiscal trainwreak.

Debtless's picture

Since the US gdp is 7x more than England - this latest QE is over a trillion $ relatively. 

Harlequin001's picture

Give it 12 months it will be a trillion, 'literally'...

dcb's picture

well, you know these central bankers. if first something doesn't work keep doing it again and again instead of admitting maybe there is something wrong with your theories. of course britain has high inflation above what the central banks is supposed to allow. But hey, that never stopped them when it cam to keeping their banker owners happy. I am starting to realize this is only going to ed when the public starts on a massive campaign to go after these people as targets of the economic warfare they are engaging in against us civilians.


These people are legit targets of economic warfare 

razorthin's picture

It tells me it is time to add to my AGQ

EL INDIO's picture

High inflation, Austerity and more QE !

People are getting fucked from all orifices.

Global Hunter's picture

"It takes away quite lot of risk. This is positive for the market."


What Chris doesn't mention is whether the positive market moves will keep pace with the rate of decline of the Pound, I assume he hasn't contemplated that yet.

Harlequin001's picture

Who gives a shit; I've got gold.


yabs's picture

this iws finannacial terrorism

inflation is already 5 pewrcent in uk and now the pound is being butchered

This is a cpital offencer IMHO

only another bailout foir banketrs

I cannot say hoiwangry this makes me

If you read thias KINg you should have your throat slit

Catequil's picture

Expect riots in London soon.

MorningStar's picture

I am becoming confused about Eu.  I read the banks are trying to bailout the government and then I read, in another article, that the government is trying to bailout the banks (and Greece).  This mush of confusion can only add to the fear of the world markets.  Great article & well researched.  Thanks again.

Jimmy_86's picture

Remember though folks, this is just an "asset swap"!! Nothing to see here...move along now, there's a good chap...

Enkidu78's picture

Its funny we pay over £75 to fill our cars up with fuel, shopping for food is so so expensive everyone has made cut backs...   Not we got 75Bn of pure inflation injected straight into what seems like our housing bubble? 

FunkyOldGeezer's picture

The UK already had its TWIST operation, so this gives a nice look into what future US policy might well be.

Erm... 75 Bilion X 7 is 525 Billion, NOT 1 Trillion, so maybe another $1.5 Trillion in US QE3 when it comes?

Good news for UK metal holders, risk is now more OFF than ON. GBP to 1.20s again or even Dollar parity in the short term, unless US QE3 is announced earlier? Either way, metals will be bought again, this time with commercials likely to take long side too.

Who knows?????


snowball777's picture

Iain Macleod must be spinning at high RPM as the country that coined the term 'stagflation' is steering straight into it.

Full speed ahead!

The conservative party in the UK will pay dearly for this stupidity in short order.

FunkyOldGeezer's picture

What's the use of having an 'independant' Bank Of England if government policy forces it to make decisions it might otherwise have had far less interest in taking?

A fool's paradise, but marginally better than when the bank was fully in the politicians claws.

The stagflation we've had, for at least the past 15 years, continues.

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