BoE minutes to focus on QE voting split – Capital Economics

Share | (Barcelona) - With the MPC only half way through the latest £50bln expansion of its QE programme, the Capital Economics team believe that the main interest will be in whether Committee voting was unanimous or not.

If so, they believe that it could give an indication into whether or not the Committee plans to extend the current QE programme further. They explain, "Given the Committee's view that time is needed to assess the impact of the Funding for Lending Scheme ( FLS ), we expect August's unanimous vote to hold rates at 0.5% and leave QE unchanged at £375bn to be repeated in September."

They see August's fall in inflation as suggesting that July's rise was just a temporary blip away from its downward trend. "The drop in CPI inflation from 2.6% to 2.5% entirely reflected a fall in the core rate from 2.3% to 2.1%. July's core inflation rate had been boosted by the earlier than usual end to high street sales and a sharp Olympics-related rise in air fares inflation, so a drop back in August had always looked likely."

They "anticipate a bigger drop in inflation in September - perhaps to 2% - as the anniversary of last year's utility price hikes is reached." Elsewhere however, they believe that the weak economy should push core price pressure down further, keeping inflation low next year.

They conclude, "Overall, while inflation's recent downward progress has been slow, the prospect of a further decline below the MPC's target should ensure that the Committee feels free to provide the economy with further stimulus - in the form of more QE and perhaps even a rate cut - later this year."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Forex and Currencies

Referenced Stocks: FLS

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