UK: BoE Inflation Worries Not Totally Assuaged

Posted July 19, 2012 by Editor

• Surprising few, the minutes to the 4-5 July BoE MPC meeting showed the committee to be split somewhat over the decision to enlarge the asset purchase program by £ 50 bln  with two members dissenting. However, it is important to stress that all nine members agreed that the case for further stimulus this month was compelling given the clearly weaker real activity backdrop and lower-than expected inflation backdrop.
• The two dissents were on whether additional asset purchases were necessary in addition to the other new BoE measures including Funding for Lending, as weak labor market productivity remains a concern.
• DE view: Policy will be on hold to at least November, with the Inflation Report due next month likely to give a clearer picture regarding the extent to which the BoE will have reassessed inflation risks ahead to any material extent.  However, any further enlargement of asset purchase looks less likely at this juncture.
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