Bank of England Governor speaks
Yesterday evening Mervyn King, the BoE Governor spoke Mr King was speaking to an audience in the West Midlands on the eve of the government's Spending Review. He described the sober decade as one of "savings, orderly budgets, and equitable re-balancing". The negative view will do little to support the pound, and it's probably the case they are talking the pound down to try and weaken the currency to boost exports.
As I posted recently the weakening of currencies may lead to a currency war.
More Quantitative Easing?
Mr King also raised hopes that the Bank may inject more money into the economy through its process of quantitative easing (QE). He said that at present the amount of money in the economy was still "barely growing at all".
He added that it was a "key role" for the Bank to provide stimulus when the economy was in need. The Bank has so far put £200bn into the economy through QE. Some economists now expect the Bank could inject at least another £100bn into the economy following the next meeting of its Monetary Policy Committee at the start of November.
Today the BoE minutes will show who voted for a rate increase, and who voted for more QE. We expect a 3 way split that will show a lack of consensus. It's the fear of more QE that has pushed the pound down recently. Couple this with today's spending review announcement and everything is pointing to a weaker pound.
Labels: BoE Minutes, Spending Review