Had the Bank of England or the European Central Bank changed anything with regard to interest rates and monetary policy today it would have been met with as much surprise as a Martian invasion.
As our own Mike Paterson of MSPFX.co.uk said: “Yawn, ……”.
And we’ve got a lot more of this same ol’, same ol’ to go yet.
Everyone is now on a wait and see strategy (or more likely a wait and hope strategy) as they cast their eyes around the globe looking for that country or region that will suddenly and magically sprout a lucrative import market with lots of ready cash into which exports can be pumped in order to promote growth. Fat chance at the moment.
Rather all we are really likely to see is a continuation of the status quo, or a slow and steady ramping up of easing, as we use what we have to try and keep us as near as possible in the lifestyle we have become accustomed to. But that of course kicks the ever heavier can down the road for the next generation(s) to tidy up.
And as Nida Ali, economic advisor to the Ernst & Young ITEM Club, comments, no-one expected any changes and the possibility of more QE further down the line does exist but the BoE does need to send clearer signals about its commitment to UK economic recovery: “There was never any realistic chance of a change in monetary policy today. The outlook remains pretty similar to last month, with the fourth quarter of 2012 likely to have been weak and the recovery in the coming months expected to be slow.
“The Bank has made it clear that it judges the government’s decision to use the cash accumulating in the Bank’s Asset Purchase Facility to reduce the stock of government debt as equivalent to purchasing gilts through the APF. The minutes of recent MPC meetings have sent contradictory messages over whether Committee members are open to authorising further asset purchases.
“In our view, the Bank has been very ambivalent about their policy stance, with members projecting a neutral attitude about whether policy should be loosened or not. We think that, similar to the Fed, the Bank should make a clearer commitment to doing whatever it takes to keep the recovery on track and provide guidance on the likely future path of rates. This is especially true in the current circumstances with the recovery and confidence being so fragile.”