Sterling Strengthens As BOE’s Posen Drops Call For Easing Increase

By David Schutz,

THE TAKEAWAY: MPC member changes mind oneasing; QE vote 8-1 as BOE minutes strikehawkish tone -> BOE wary ofupside CPI risk -> Cable jumps on the news

Adam Posen ended his push for increased quantitative easing and the dovish David Miles appeared wary of upside inflation risks, minutes from the BOE’s most recent meeting revealed today. In an abrupt change of mind, Posen joined the majority of the Monetary Policy Committee in voting to leave easing unchanged, while Miles described his views on increased easing as “finely balanced.” All 9 MPC members voted to keep interest rates unchanged at ultralow levels. Sterling gained as an increase in quantitative easing became less likely.

The BOE’s hawkish tone reflected recentcomments made by MPC members suggesting that inflation may proveharder to control than previously believed. MPC member Tuckeryesterday said inflation may not fall as fast as hoped, anddescribed recent news on inflation as “bad.” Upside CPI risks come from oil and commodityprice increases.

The recent comments struck a different tonethan last month’s Minutes, in which the central bank saidit sees inflation easing to manageable levels inthe coming years.

The BOE Minutes additionally reckoned that GDPresults in Q1 and Q2 may actually register a recession.The central bank said growth could contract in one or successivequarters because of weak construction during the Jubileeholiday. The Minutes also said that the global recoveryis proceeding broadly as expected, concerns out of the Eurozone arenow greater if anything.
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Original Article: http://www.dailyfx.com/forex/market_alert/2012/04/18/Sterling_Strengthens_as_BOEs_Posen_Drops_Call_for_Increased_Easing.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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