Reuters: US Dollar Report: QE was possible in June, waited for new schemes -BoE's Weale

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

QE was possible in June, waited for new schemes -BoE's Weale Jun 21st 2012, 17:30 LONDON, June 21 | Thu Jun 21, 2012 1:30pm EDT LONDON, June 21 (Reuters) - The Bank of England has appreciable room for more monetary stimulus and could have injected extra cash into the economy without creating inflation risks in June, policymaker Martin Weale said on Thursday. Weale, who voted with the 5-4 majority against extending the Bank's purchases of government bonds beyond the current total of 325 billion pounds earlier this month, said he had wanted to see details of new schemes to ease credit constraints first. "The Monetary Policy Committee was notified at its June meeting about the discussions under way between the Treasury and the Bank about how best to ease banks' funding costs and how to enhance their ability to lend," Weale said in a speech at the University of Surrey in Guildford. "While I shared the view that further monetary stimulus could be applied to the economy without putting the inflation target at risk, I wanted to wait for the outcome of these discussions before I felt able to come to a view on the appropriate stimulus," he said. Weale said the fall in prices of raw materials improved the overall inflation outlook, lowering the risk of above-target inflation becoming entrenched. "This in turn means that there is appreciably more room for further monetary stimulus," he said. At the same time, the near-term prospects for the economy had worsened. "Data for April suggest that the international environment has become considerably worse," he said. Britain has fallen into its second recession in four years, and is in danger of a longer slump as the crisis in the euro zone - its largest trading partner - is hurting exports and business confidence. Weale's comments will boost expectations that the central bank will launch another round of quantitative easing asset purchases in July. Ben Broadbent, who also voted against more QE in June, said in a Reuters interview on Wednesday that the case for further stimulus had grown. However, Weale indicated doubts that buying more gilts would make a significant difference. "Our past asset purchases have probably provided some support to the economy, even if it is not clear how much," he said, pointing to research that suggested the impact may have been "appreciably" lower than the central bank's estimates. In any case, the asset purchases were not designed to bring effective interest rates set by banks closer to the central bank's record low interest rate of 0.5 percent, he said. "It seems highly likely, although of course we cannot be certain, that high interest rates and, in all probability, credit rationing, are factors depressing the economy," he said. The central bank's new liquidity tool - the so called Extended Collateral Term Repo (ECTR) - and the new funding-for-lending scheme were important steps to provide extra monetary support for the financial system and the economy. The financial crisis had highlighted the need for a wide-range of tools to keep monetary policy effective, Weale said. "The Chancellor (finance minister) recognised this when he spoke at Mansion House about 'monetary policy in all its forms'," he said. "I suspect that, pound for pound, the new interventions will do more to support the economy than would deploying the same sums on further asset purchases," he added. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions