Back in July the Bank of England propped up the British economy with a 50 billion Pound cash injection. Now that round of support is just weeks away from ending and the situation in the UK has not greatly improved.
However, now appears that should tomorrow’s prelim third-quarter GDP figures continue to support the UK’s yo-yoing approach to economic recovery the BoE is prepared to deploy an additional round of quantitative easing.
In a speech made in Wales yesterday BoE Governor Mervyn King asserted that the UK economy has been ‘broadly flat’ for some time and is now proceeding at a ‘slow and uncertain pace’. Despite optimistic indicators in recent weeks, such as a drop in unemployment levels and cooling inflation, King expressed that it remains ‘difficult to know whether [the] positive signs will persist.’
King then added ‘Should those signs fade the Monetary Policy Committee does stand ready to inject more money into the economy [it will think] long and hard’.
On November 8th the MPC will reveal its next policy decision and officials must reach a decision regarding increasing bond purchases.
Using a pretty, weather-based metaphor King also made mention of the far from assured larger economic situation, ‘The storm clouds coming from the Euro area have not yet lifted, and in other parts of the sky new clouds have drifted over. China, India and Brazil, the three largest emerging market economies, are all slowing.’
King added: ‘There are no shortcuts to the necessary adjustment in our economy. The problems in the world economy mean that we shall have to be patient.’
The Governor then went on to repel the concept of uniting monetary and fiscal policy through methods like the direct financing of government spending. He stated: ‘It is the independence of the bank that allows us to create money without raising doubts about our motives. Just as it is crucial that governments do not control the printing of money, so too the unelected central bank must not determine the levels of taxes and public spending.’
Despite King’s downbeat approach the Pound was able to post modest gains, although not enough to lift it far from its six-week low against the US Dollar.
As of 10:00 am
The Pound to Euro exchange rate is currently trading at 1.2345
The Pound to US Dollar exchange rate is currently trading at 1.5972
The Pound to Australian Dollar exchange rate is currently trading at 1.5481
The Euro to US Dollar exchange rate is currently trading at 1.2939
The Euro to Pound exchange rate is currently trading at 0.8099
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