Bank of England Minutes Suggest Additional Easing Unlikely
The British pound (GBP) rallied to a two-week high versus the US dollar on Wednesday, after the latest BOE (Bank of England) meeting minutes indicated that further monetary easing measures were unlikely for now. However, one member of the MPC (monetary policy committee) did actually vote for additional quantitative easing measures. David Miles was the lone voter who wanted an increase in available QE funds of £25bn.
The report showed that committee members cited an uncertain economic outlook, which has banks reticent to distribute funds to homeowners and businesses. The pound sterling experienced broad based gains as the market looked to have priced in the risk that more support could have been seen for QE. Monetary easing is typically regarded as a negative influence on a nations currency as it affects supply dynamics and devalues existing currency already in circulation.
The GBP/USD currency pair moved as high as $1.5955 today, (GBP/USD weekly analysis) which was the highest level seen since November 9th. The pound has been in an extended down trend recently, with GBP/USD bulls only initiating a corrective move higher from the 1.5826 area lows on the 15th November.
The MPC were unanimous in their vote (9-0 in favor) of holding interest rates at the current record 0.5% low, with no MPC support for a drop to 0.25%. The Central Bank has however come under significant pressure to increase monetary easing measures this year, in order to bolster the struggling economy. A drop back into the so called "double dip recession" intensified the situation and brought cries for an expansion of the government bond purchase program.
The MPC meets on a monthly basis with minutes of the meeting typically released on the Wednesday of the second week following the meeting.