Pounds Sells Off As BOE Minority Favored More QE; Majority Were Wary Of Increase

By David Schutz,

THE TAKEAWAY: BOEinterest vote unanimous; QE vote 7-2 -> members see“moderate” growth , warn of short terminflation risks -> Cable sells offafter minutes release

A majority of Bank of England board members saw“no reason” to change the central bank’sbenchmark interest rate and current quantitative easingprogram, the BOE minutes revealed today. Board members votedunanimously to keep rates at ultralow levels, while two memberssupported increasing quantitative easing but were outvoted in a 7-2vote.

Dovish board members Miles and Posen argued that more isneeded to maintain the economy's supply capacity, but the majority of BOE members said they believedincreased quantitative easing would send a message that the economyis worse than it actually is.

The minutes on the whole pointed to arelatively unchanged picture as the BOE attempts to juggle lagginggrowth with inflation risks. The central bank said that recent economic datareveal a “moderate” growth increase in the UK, as theeconomy begins to turn around after experiencing a massive stunt ingrowth over the past three years. The BOE said that it seesinflation easing to manageable levels in the coming years; howeverthe central bank referenced “substantial, clear”inflation risks in the short term as political tensions continue toboost oil prices and erode consumer confidence.

The pound sold off on the news that some BOE members believed further QE was necessary. Cable erased gains made earlier in today’s session , and poor public debt data released with the BOE minutes was also seen eroding confidence in the pound.
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Original Article: http://www.dailyfx.com/forex/market_alert/2012/03/21/Pounds_Sells_off_as_BOE_Minority_Favored_More_QE_Majority_Were_Wary_of_Increase.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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