UK Is One Step Closer To More Quantitative Easing


(UK) APR CPI Y/Y: 3.0% V 3.1%E; CORE CPI Y/Y: 2.1% V 2.0%E

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(UK) IMF commented on UK and noted that further monetary policy easing was needed and the MPC should consider cutting interest rates below 0.50%. The IMF believed that weak UK inflation pressure gave scope for more easing in monetary policy and the UK should consider further credit easing measures and fiscal easing if downside risks materialized as UK unemployment remained much too high.

(UK) BoE Posen reiterated inflation was a bit stickier than hoped and BOE members need to think if more QE was needed. He noted that some Business surveys had been upbeat but contagion effect from Euro Area was hampering the UK economy.

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How to interpret these headlines?

Plain and simple, we are looking at mounting pressure from within MPC (Bank of England) and abroad (IMF) for further Quantitative Easing, Stimulus, raising the APT (Asset Purchasing Target), or whatever “printing more money” is called.  Ultimately we should see a weaker GBP because both lower inflation and speculation for further easing are weighing the Sterling down.

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