BoE minutes weaken GBP
According to the IMF the eurozone remains the weakest part of the global economy and its World Economic Outlook that a prolonged period of slack growth in the eurozone will diminish the chances for expansion in Central and Eastern Europe.
However GBP has slipped significantly against the Euro as the minutes of BOE’s policy meeting were released.
As far as the proposition to continue with the program of asset purchases totalling £375 billion is concerned, six MPC members voted in favour while three voted against. Governor Mervyn King, David Miles and Paul Fisher who voted against preferred to boost the QE program by £25 billion to a total of £400 billion.
According to the minutes, the MPC affirmed that recent data had evolved in line with expectations and that “stimulus from the Funding for Lending Scheme (FLS) and the asset purchase programme were likely to support a gradual recovery, although there had been some signs on the month that the pace of improvement in credit conditions had eased and net lending had so far remained subdued.”
The majority of the MPC members did not consider a further increase of the asset purchase program necessary but Governor Mervyn King, David Miles and Paul Fisher argued that “by lowering longer-term interest rates and supporting a range of asset prices” they could “facilitate a smoother path towards the economy’s new equilibrium, help prevent a more persistent reduction in spending, and thereby avoid potentially lasting damage to productive capacity.”
Furthermore, the MPC discussed the new remit established by the Chancellor of the Exchequer George Osborne on March 20, which gives the central bank more leeway in dealing with elevated inflation in challenging times for the economy. They also considered extending the Funding for Lending program in order to boost credit.
Later in the day we have the Bank of Canada rate decision and subsequent conference – this will likely see a shift in GBP/CAD.