LONDON (MNI) – Bank of England Governor Mervyn King’s speech
Tuesday evening, in which he said the Monetary Policy Committee stood
ready to do further quantitative easing if recent encouraging economic
signals were to fade, has led the Nomura economics team to push back its
forecast for extra QE to February.
Nomura had been predicting more QE in November, which has been the
majority call among analysts, but doubts are mounting about the timing
of further stimulus and King’s guarded, and conditional, comments on
the case for extra stimulus have fueled these doubts.
Nomura economist Philip Rush highlighted the following passage in
King’s speech in a research note.
“At this stage, it is difficult to know whether some of the recent
more positive signs will persist. The Monetary Policy Committee will
think long and hard before it decides whether or not to make further
asset purchases. But should those signs fade, the MPC does stand ready
to inject more money into the economy,” King said.
It is highly questionable if there will be enough clear data
between now and the November 7-8 MPC policy meeting to show if these
encouraging signs are fading.
“With only the PMIs, IP and a notoriously unreliable and
backward-looking GDP estimate left to change things before the November
decision, we no longer expect the MPC to extend its purchase programme
then,” Rush said in the note.
Nomura has pulled its prediction of an extra stg25 billion of extra
QE in November and is now predicting stg50 billion in February instead.
In other responses to King’s speech, Barclays economists stuck with
their forecast of an extra stg50 billion in November but highlighted the
uncertainty around their call.
The MPC “decision is unlikely to be unanimous, and, perhaps
reflecting the uncertainty about the vote, Sir Mervyn shied away from
giving markets a clear direction,” they noted.
-London Bureau; Tel: +442078627491; email: drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$]