The Pound Sterling Live - The Heart-Beat of the British Pound

British Pound Live: BoE minutes betray the relaxed attitude of the MPC say RBS

Details

Category: The Pound Sterling Live - The Heart-Beat of The British Pound

Published on Wednesday, 19 September 2012 09:17

Written by Sam Coventry

Review of the performance of the British pound on the 19th of September 2012.

12:00: RBS see a relaxed tone from Bank of England, supportive of QE extension

The pound sterling (Currency:GBP) is 0.09 pct higher against the euro at 12466 as analysts continue to offer their opinion of the main event of the day - the Bank of England MPC minutes. Consensus is that the Bank is likely to act again on QE before the year's end.

The pound dollar exchange rate is 0.21 pct in the red at 1.6211. The pair is losing ground now.

The pound Australian dollar exchange rate is 0.07 pct higher at 1.5540.

The latest to comment on the MPC Minutes is Ross Walker at RBS:

"In terms of the increasingly evident near-term price pressures, the Minutes conveyed a relaxed tone, acknowledging that whilst there is likely to be 'a less rapid fall in inflation' than in the August forecasts, it 'was not sensible in such a [volatile] environment to ascribe a high probability to any particular short-run projection'. We interpret this as a subtle indication that short-term upside inflation moves would not in themselves prevent any QE extension in November."

10:50: More quantitative easing before the close of 2012

The Bank of England Monetary Policy Committee (MPC) was unanimous in voting down interest rate rises and further quantitative easing measures at their last meeting.

Nevertheless, in the wake of the decision we have seen further opinion expressed that 2012 will see another expansion of the sterling-negative QE being announced. (See the UBS comment at our initial post).

Howard Archer of IHS Global Insight

"We strongly suspect that the Bank of England will deliver a further £50 billion of QE in the fourth quarter, taking the stock up to £425 billion. November seems the most likely time for this, given that July’s £50 billion QE extension (to £375 billion) runs through to then and the MPC wants time to see what impact the “Funding for Lending “ scheme has.
 
"However, we remain sceptical that the Bank of England will take interest rates down to 0.25% given ongoing serious doubts within the MPC that such a move would have a net overall beneficial impact."

10AM: GBP one of the best-performing currencies out there

"However, compared to July, August’s prices were actually 0.5% higher; so there’s not much there for the consumer to get too excited about," says Richard Driver at Caxton FX.

However, a morning currency note from UBS suggests the inflation could lead to further quantitative easing at the Bank of England. This view is outside consensus, but could it lead to a growing view that such an event is indeed possible? 

"Our economics team notes that subdued wage inflation should encourage the MPC to expand its Asset Purchase programme once again in November. The September MPC minutes due today will probably offer further guidance on policy," says Gareth Berry at UBS.