BOE’s Bailey Seems A Bit More Optimistic Now Than in May
BOE's bailey sees the GDP contract by 20% in H1, against -27% in May
Skerdian Meta•Thursday, June 18, 2020•1 min read
The Bank of England held its usual meting earlier today. They let cash rates unchanged at 0.10%, but increased the QE stimulus package by 100 billion. Last month, the BOE was expecting the economy to shrink by 27% in Q1 and Q2 combined, but now, the GDP contraction is seen lower at 20% for the first half of 2020. This is slightly more dovish than previously and Bailey thinks that the economic downturn has not been as and as previously thought.
- Trying to work out implications for UK and other countries’ experiences with negative rates
- Decision on negative rates is not in-any-sense imminent
- Evidence suggests economic downturn has not been as severe as in May scenario ‘but let’s not get carried away’
- Labour market is probably more relevant for judging inflation risks
- Now expecting 20% fall in GDP in Q1 and Q2 combined vs 27% in May forecast
- Slowing of QE pace reflects recent signs from economy and calming of markets since March
- We are slowing from warp speed QE to something which is still fast by historical standards
- Trajectory on inflation is for it to fall to very low levels
- Broadbent: It would be wrong to see slowing QE as a sign of tightening
This fits with the earlier stance of being more-optimistic but the market is brushing it off and selling the pound hard. There was initially a pop on these headlines but only momentarily, but has resumed the decline again now and is around 150 pips lower on the day.
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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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