Friday, October 23, 2009

All change after the election

Bank of England is set to reverse quantitative easing

The Bank of England today said it is ready to reverse quantitative easing as the housing market showed further signs of recovery. Policymakers on Threadneedle Street said the Bank will have to withdraw the £175 billion of freshly printed money it has pumped into the economy, but only when the time is right. Adam Posen, a member of the monetary policy committee, said: "In the medium term, meaning more than six months out, there's no question that we're going to have to reverse the extreme policy measures that we took. The reason for being very cautious is because there are high stakes involved. It's not because things are that knife-edge or that uncertain but it's that you don't want to make a big mistake. So we on the MPC are being very cautious."

Posted by wanderinman @ 03:24 PM (1930 views)
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12 thoughts on “All change after the election

  • “withdraw from the extension” or “reverse the stimulus”? I think it’s the former not the latter!

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  • Bank of England is set to reverse quantitative easing

    I won’t be holding my breath unless as with the Americans they plan to sell off huge chunks of British infastructure to offshore interests.

    God help us!

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  • This is the problem – they’ve pumped in 175bn and we’re still in recession. What happens when you pull it out? Like Crunchy says – God help us!

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  • ‘The Bank of England today said it is ready to reverse quantitative easing as the housing market showed further signs of recovery.’

    This is utter fantasy. For one thing how do they reverse it exactly and for another QE is supporting UK Government debt purchases since very few foreigners, understandably, want to touch it. With budget deficits of 200 billion every year for years without QE how is this going to be covered?

    More games from the MPC members talking the pound down one day and up the next. Suspiscious? Surely not.

    Interesting though how they make a direct link between QE and house price rises for all those who said QE wasn’t going to affect the housing market.

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  • We have these plonkers saying these things (I wish they were true!) and then one of GB’s cronies (AD) saying or implying that with the GDP figures showing -0.4% there’s no way they’re gonna stop pumping in money and get those IR’s up…

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  • @timmy t – “This is the problem – they’ve pumped in 175bn and we’re still in recession. What happens when you pull it out?” well the part of the problem is they don’t know as it’s all a bit of a big experiment – suffice to say if you read my fundstrategy posting it all has to be timed to perfection !

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  • “In the medium term, meaning more than six months out, there’s no question that we’re going to have to reverse the extreme policy measures that we took.”

    More than six months out there will be a new government, no doubt the Tories. I think it was Cameron who said in his recent conference speech that a Tory government would soon halt QE. So perhaps this quote from Adam Posen is a veiled nod to the Tories.

    Also: http://www.thisislondon.co.uk/standard-business/article-23759264-mervyn-kings-warning-over-interest-rates-lifts-pound.do
    “Bank of England Governor Mervyn King stunned the City with a warning to Britons to prepare for interest rate rises … It came after King wrote in The Herald newspaper: “I do not know for how long interest rates will remain so low. But at some point they will return to more normal levels and it would be wise to take this into account in your financial planning.” ”

    The BoE could to be turning more attention to the exist from QE.

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  • fallingbuzzard says:

    Balderdash and piffle from the Evening Standard again. its no surprise that they became a freebie paper. The BOE will never withdraw that money but they will increase the price of money in line with historic levels and I think that steep commodity price rises will force all Western economies to adopt interest rate policy more in line with what we experience between the 1960s and mid 1990s, rather than the bleep of the last 10 years. They will undoubtedly hold the bonds they bought until maturity, just as they have always stated that they would. Anyone who thinks otherwise is a lunatic or a journalist unable to get any decent stories from the City. With these journos, its either house prices rising and booming banker recovery or apocalypse now 20% interest rates by June.

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  • Well now, I don’t think this will be happening soon after the latest 0.4% fall in GDP…what was that now? Another 25 billion extension needed?

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  • cynicalsoothsayer says:

    BoE & Government rift widening. It’s a choice between house price falls on the one hand, and house prices falls on the other.

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  • mark wadsworth says:

    @ Timmy T and ChrisA.

    1. QE is all smoke and mirrors, it is a massive paper shuffling exercise that has absolutely NO impact on bank lending whatsoever.

    2. QE has NOTHING to do with the government running up additional debts of £200 billion per annum. That is a completely separate topic and will happen with or without QE. We have had times of high govt borrowing before, with QE nowhere in sight.

    3. Ergo, reversing it will not have any impact on bank lending either, and it will not prevent the govt from borrowing £200 billion a year.

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