Bolsom: BoE Pause to Qe Shows “lack of Confidence in Sustained Recovery”
4 February 2010
The Bank of England voted to keep rates on hold today at 0.5 pc and paused quantitative easing at £200 billion pounds.
Sterling rose in response to the announcement, moving nearly half a cent against the dollar to a high of $1.5871 from a pre-announcement low of $1.5806. Against the euro it rose to €1.1470, from €1.1429 before the release.
Mark Bolsom, Head of the UK Trading Desk at Travelex, the FX Payments Specialist, said, “Although this was widely expected by the markets, the fact that the Bank has voted to pause, but not end, the asset purchasing programme shows they don’t have overwhelming confidence in sustained economic recovery. This is not the vote of confidence investors will have been looking for.
“It’s unsurprising though - the UK crawled out of recession in the last quarter of 2009 and the Bank will want to see at least two consecutive months of reasonable growth before they even consider tightening monetary policy. With that in mind, we can expect interest rates to remain on hold at 0.5 pc for quite sometime. I stand by my prediction that they will remain at 0.5 pc until 2011 at least.”
Bolsom continues, “The Bank of England has clearly sat on the fence with this decision, highlighting their fear that a double-dip recession is a distinct possibility.”