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14 Aug 2013
Flash: Has BoE forward guidance been a failure? – RBS
FXstreet.com (New York) - The commentary on the wider UK economy today was marginal more positive, with domestic economy developments described as 'broadly positive' with survey indicators rising 'more strongly than expected' and the Committee detecting encouraging signs that the euro area might be returning to modest growth, notes the RBS Research Team.
Key quotes
“None of this is very different to previous months and the key uncertainty remains about the response of supply to stronger demand and the related implications for productivity and employment.”
“The other 'less dovish' surprise was the absence of any support for extending QE asset purchases – we had expected David Miles to revert to voting for a £25bn increase in gilt purchases. Even for the doves, policy stimulus is to be delivered by forward guidance rather than active market intervention (eg, a Bank rate cut or an increase in asset purchases). Given the ongoing rise in market rates – and the less dovish forward guidance framework, MPC Minutes etc relative to market expectations – it is not clear that verbal guidance will be sufficient to achieve the desired monetary accommodation.”
Key quotes
“None of this is very different to previous months and the key uncertainty remains about the response of supply to stronger demand and the related implications for productivity and employment.”
“The other 'less dovish' surprise was the absence of any support for extending QE asset purchases – we had expected David Miles to revert to voting for a £25bn increase in gilt purchases. Even for the doves, policy stimulus is to be delivered by forward guidance rather than active market intervention (eg, a Bank rate cut or an increase in asset purchases). Given the ongoing rise in market rates – and the less dovish forward guidance framework, MPC Minutes etc relative to market expectations – it is not clear that verbal guidance will be sufficient to achieve the desired monetary accommodation.”