View the article online at http://citywire.co.uk/money/article/a660177
Pound slumps as Mervyn King backs QE increase
Bank of England governor voted alongside Paul Fisher and David Miles to raise the stimulus scheme to a total of £400 billion.
Sterling slumped even further against the euro and US dollar after the Bank of England revealed that governor Mervyn King was among a trio of monetary policy committee members who want further quantitative easing.
King voted alongside Paul Fisher and David Miles to raise the stimulus scheme by another £25 billion to a total of £400 billion, but the three were outvoted by the six other members of the committee at their meeting two weeks ago.
The support for more QE marks a shift from previous votes where only Miles had voted for more stimulus. King, who is to be replaced by Mark Carney in the summer, said a week ago that there was ‘cause for optimism’ for a UK economic recovery, but also indicated that it might be acceptable for the Bank to temporarily miss its inflation target.
The pound, which had already been trending lower, shot down 0.8% against the euro to €1.1431. Sterling lost 0.5% against the US dollar to $1.5350. The decline continues a trend of pound weakness this year as markets target the UK’s weak economy against expectations that the eurozone and US economies are improving.
The minutes from the MPC’s meeting make a case for further QE: ‘Further asset purchases, in part by acting to reduce longer-term interest rates and underpinning the value of a broad range of assets, could help the process of rebalancing the economy, and avoid potentially lasting destruction of productive capacity and increases in unemployment’.
The MPC voted unanimously to keep the base interest rate on hold at 0.5%
News sponsored by:
After Boris announced he was backing Brexit, sterling suffered its biggest slump in six years. Our Market Mavens discuss. Follow the Market Mavens LinkedIn page for weekly videos, in which our panel of industry experts share their views on financial news
More about this:
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add firstname.lastname@example.org to your safe senders list so we don't get junked.