- If sterling weakness hurts BOE inflation credibility, strongly believes case for accommodation much weaker.
- Weaker pound reflects economic rebalancing, unwinding of haven flows, not sensible to prevent adjustment by tightening policy
~And so dampens down rate cuts expectatons
- Appropriate to tolerate above target inflation over the next two years
- Little evidence inflation expectations have become de-anchored
- Hopeful for modest UK growth. Impact of FLS program likely to be more marked in coming months.
MPC memeber Ian McCafferty has been firmly against further QE all year defending the current levels and their effectiveness to date .
The BOE is starting to find itself between a rock and a hard place. Austerity is strangling growth, and while QE seems not to be helping the situation it’s difficult to gauge where we would be without it. We can lower rates as the effect will be negative to the currency adn we can’t raise them to curb inflation as it’s mainly imported.
Still one of the major problems in the UK is the lack of flow of QE and FLS through to the real economy. In my mind this needs to be tackled first and foremost. It’s hard for business to boost growth with two hands tied behind their back.
Cable taking the comments as confirmation that QE and rates are to stay at current levels for some time. We’re reversing earlier losses back to opening levels. Current high on this move 1.5253