The BOE has shocked the market today by extending its bond buying plan to 175 B str from just 125 b. the central bank said that the broad money growth remain weak and the recessional is deeper than previously thought.and the spare capacity of the exconomy has increased further. The bank seems worried about the economic recession more than what was widely expected and sees that the economy is still in need of further liquidity to move this current strict credit conditions helping the confidence at the current low level of demand. The cable has slumped below 1.685 after the BOE decision which drived the interest rate outlook down as the economy looks in need of a longer than expected time to get out of recession and stablize again. The British pound has got a push earlier this week by the better than expected release of UK PMI manufacturing index of July which reached the expansion territory above 50 for the first time since March 2008 at 50.8 and it was expected to be just 47.7. So, the market was waiting for keeping this 125 B with no further adding. In the previous meeting, The BOE decided to not add more than the £125bn already authorised satisfied by just announcing the probability of reviewing this amount in this meeting.
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