2013-07-22 – London
New Bank governor to adopt a new stance on monetary policy
Minutes of the July Monetary Policy Committee meeting of the Bank of England reveal that the Bank will not expand quantitative easing (QE) as a means of boosting the economy. The Committee voted unanimously in favour of the proposition to maintain the stock of asset purchases at £375bn. Market analysts expect the new governor, Mark Carney, who joined the BoE on July 1 to switch strategy from QE to market guidance anytime soon.
Markets temporarily feared the crumbling support for QE could slow down the already weak economic recovery and expected bank rates to rise over the next two years. Yet markets calmed down quickly with yields on 10 year government bonds falling on Thursday, a day after the minutes were published, signalling a rise in confidence among bond investors.
Former BoE governor Sir Mervyn King had been promoting QE as a means of injecting money directly into the economy when interest rates continue to be near-zero, making traditional monetary policy ineffective.
Among the potential indicators the bank might target with its monetary policy in the near future are unemployment and economic output, rather than a pure focus on inflation.
