Next Round Of QE In England Now A Virtual Certainty

In a speech before the Imperial College in London, Bank Of England Policy Committee member David Miles made it almost a  virtual certainty that Quantitative Easing will continue in England, saying it is "entirely plausible" that further QE will be appropriate. According to Market News, Miles said that the minutes of the February meeting of the MPC showed QE could yet be expanded, and said that for him the decision to keep QE unchanged at that meeting was "finely balanced".

Full Miles quote:

"It is entirely plausible that as economic events unfold it will become clear that an even more expansionary monetary policy will be appropriate," Miles said.

 "To deny such a possibility must mean that you either cannot imagine significant downside risks for economic activity and inflation - which suggests an imagination deficit disorder - or believe that monetary policy has become ineffective."

Good thing the UK is not part of the EMU, or else Miles would would be lamenting a "printer deficit disorder" a condition prevalent among the Club-med disasters formerly known as PIIGS.

And to critics of QE, Miles had just one thing to say:

"The QE policy can have beneficial effects even if the injection of additional money by the Bank of England does not, in the end, have much impact on the M4 measures of money. Less than a year since the beginning of the QE policy it is probably too early to have observed the full (or maybe even much) impact of asset purchases on the real economy. But by keeping the stock of asset purchases in place one will be letting that play through."

And this pearl of wisdom, which Miles no doubt learned from his American counteparts: "if QE facilitates corporate securities issuance to pay off bank debt or facilitates banks to issue bonds and equity capital, these would not bolster broad money growth."

So now you know why not only UBS will be correct in their estimate of the cable hitting $1.05 in the not too distant future, but why Ben Bernanke is close on Mervyn King's heels with a comparable currency suiciding announcement.


No comments yet! Be the first to add yours.