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Markets surprised by BoE QE decision

Wednesday, July 17, 2013 - 01:56

July 17 - The Bank of England has released its first minutes since Mark Carney became governor - with a unanimous vote against more quantitative easing bond purchases. Kirsty Basset looks at what this means for the UK economy.

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Markets have been caught off guard after a Bank of England policy meeting decided against more quantitative easing. Minutes from the last policy meeting show new governor Mark Carney secured a unanimous 9-0 vote in favour of the move. CMC market analyst Michael Hewson. (SOUNDBITE)(ENGLISH) CMC MARKET ANALYST MICHAEL HEWSON SAYING: "I think what we've seen here is a clean slate - Mr Carney's said that QE is not the way he wants to go. He wants to look at slightly more innovative ways of managing rate expectations and I think we'll probably get some more colour on that at the inflation report in August where we're expecting to hear an awful lot more about forward guidance." British government bond prices slid while the pound rallied on the news. Merrill Lynch Global Fixed Income Strategist John Wraith. (SOUNDBITE)(ENGLISH) GLOBAL FIXED INCOME STRATEGIST AT MERRILL LYNCH JOHN WRAITH SAYING: "It clearly came as a surprise to the market - not so much Mark Carney - we certainly didn't expect him to vote for QE on meeting one. But that Paul Fisher and David Miles have backed off their calls for QE was a surprise. It clearly reduces the chances of more QE in due course and higher gilt yields therefore make sense, as does a slightly stronger pound." It follows data on Wednesday which showed the number of Britons claiming unemployment benefits fell in June at the fastest rate in three years - the latest sign that Britain's economic recovery is gaining momentum. (SOUNDBITE)(ENGLISH) GLOBAL FIXED INCOME STRATEGIST AT MERRILL LYNCH JOHN WRAITH SAYING: "On one hand the data is encouraging but on the other they're not anywhere close to sounding the all clear or relaxing yet." Carney is expected to give longer term guidance on future interest rates, which he did while in charge of Canada's central bank. It's seen as an alternative way of boosting the economy, and helping households make better financial decisions. The Bank's Monetary Policy Committee is expected to give its main response with its inflation forecast on August 7.

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Markets surprised by BoE QE decision

Wednesday, July 17, 2013 - 01:56