10 February 2012: SH: Carry on easing: Bank of England announces £50bn QE

Feb 10, 2012

Minute Read

The Bank of England decided to keep the UK’s base interest rate at the record low of 0.5% today, but also decided to expand its asset purchasing programme, also known as quantitative easing (QE), by an additional £50 billion…

Azad Zangana –
European Economist

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For professional investors and advisers only.This document is not suitable for retail

This will take the total purchases of gilts to £325 billion by the end of April. The increase in the Bank of England’s QE programme is worth just over 3% of current nominal GDP. During normal times, when the banking system is functioning correctly, this would be hugely positive for growth. However, as banks are being asked to deleverage, we doubt that this cash injection will prompt extra lending to the real economy.

The Bank of England released a statement along with the decision announcement, highlighting the downside risks to growth and inflation over the medium term. The statement also mentioned the slowdown in exports heading to Europe, indirectly caused by the eurozone debt crisis.

The UK economy remains desperately fragile, and with the outlook in Europe remaining gloomy, the latest increase in QE from the Bank of England is unlikely to reduce the risk of a double-dip recession in the near term. We expect the Bank to announce more QE once this latest round ends.

Disclaimer:
The views and opinions contained herein are those of the Kevin Murphy and Nick Kirrage, Specialist Value UK Equity Fund managers and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

For professional investors and advisers only.This document is not suitable for retail clients.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Schroders has expressed its own views and opinions in this document and these may change. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial Services Authority. For your security, communications may be taped or monitored.

Source: BONDWorld – Schroders

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