UK: Bank of England maintains status quo - ICICI Bank : Treasury Research

The Bank of England (BoE) kept its policy rate unchanged at 0.5% as expected. The quantum of asset purchases was also retained at GBP 375 bn. This was the first post-Mervyn King monetary policy meeting and first meeting for Mr. Mark Carney, the new BoE's Governor, who is the former Governor of Bank of Canada.

Although the macro-economic news has been encouraging recently, MPC did not put a lot of emphasis on recovery, while showed concerns over rising market interest rates internationally and volatile asset prices.

This leads us to believe that the new Governor would not resist providing further monetary support to the economy and raises the probability of expanding QE before the end of this year.

The minutes of this Monetary Policy Committee (MPC) meeting will be released on July 17, 2013, which will help understand the new Governor's stand on further Quantitative Easing (QE).

The statement also mentions that the Committee will assess the case of adopting some form of forward guidance, which will be released alongside the August Inflation report. An explicit mention of intermediate thresholds raises the probability of basing the forward guidance on one of the leading indicators such as the unemployment rate or the nominal GDP target.

Source : Equity Bulls

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