{"id":72262,"date":"2020-09-17T13:13:39","date_gmt":"2020-09-17T13:13:39","guid":{"rendered":"https:\/\/secondchargemortgageuk.com\/?p=72262"},"modified":"2020-09-17T13:13:40","modified_gmt":"2020-09-17T13:13:40","slug":"will-the-boe-inject-more-stimulus-into-the-uk-economy","status":"publish","type":"post","link":"https:\/\/secondchargemortgageuk.com\/will-the-boe-inject-more-stimulus-into-the-uk-economy\/","title":{"rendered":"Will the BoE inject more stimulus into the UK economy?"},"content":{"rendered":"\n

The BoE is preparing to announce its latest interest rate decision tomorrow, as it closely monitors the UK economy\u2019s rebound from the record 20.4 per cent contraction in the second quarter.<\/p>\n\n\n\n

Since then, there have been many positive signs. The economy grew by a huge 8.7 per cent in June and another 6.6 per cent in July. More recently, Britons were enticed to the high street by August\u2019s Eat Out to Help Out scheme.<\/p>\n\n\n\n

But there are challenges on the horizon. First and foremost is the worrying rise in coronavirus cases and new restrictions. Inflation also fell to 0.2 per cent in August, well below the Bank\u2019s two per cent target.<\/p>\n\n\n\n

That\u2019s a lot for the Bank of England to consider. And analysts are united in saying the BoE will leave interest rates on hold at 0.1 per cent and its bond-buying target at \u00a3745bn.<\/p>\n\n\n\n

They say that the Bank is more likely to increase stimulus in November after seeing how the economy and inflation fare.<\/p>\n\n\n\n

Further stimulus will wait until November<\/strong><\/h3>\n\n\n\n

\u201cEven if the Bank felt more loosening was ultimately going to be required, we see little benefit to the Bank announcing it now,\u201d said George Buckley, chief UK economist at Nomura in a note to clients.<\/p>\n\n\n\n

To find out more about how we can assist you with your Second Charge Mortgage please click here<\/a><\/em><\/p>\n\n\n\n

Buckley pointed out that the Bank\u2019s current bond-buying programme is scheduled to be completed around December. So, he said, \u201cwhy not wait until the November meeting when the MPC [monetary policy committee] will have the luxury of analysing another seven weeks of economic data?\u201d<\/p>\n\n\n\n

Howard Archer, chief economic adviser to the EY Item Club, agreed. \u201cThere seems little need for further MPC stimulus action \u2013 for the time being at least,\u201d he said.<\/p>\n\n\n\n

\u201cIt currently looks very possible that GDP growth in the third quarter could be around 15 per cent following the record 20.4 per cent contraction in the second quarter.\u201d<\/p>\n\n\n\n

Analysts say that if the Bank decides to act in November, as many predict it will, it is likely to increase bond-buying rather than cut interest rates further.<\/p>\n\n\n\n

Bank could take a \u2018dovish turn\u2019<\/h3>\n\n\n\n

In August, the Bank predicted economic growth would be better than expected in the near term. Yet it was more pessimistic longer-term, saying the economy would regain its pre-pandemic size at the end of 2021.<\/p>\n\n\n\n

Its forecasts were more upbeat than most, however. Jacqui Douglas, chief European macro strategist at TD Securities, said in a note that the Bank therefore could well take a \u201cdovish turn\u201d tomorrow. She predicted there will be \u201cmore focus on the downside risks to growth going forward\u201d.<\/p>\n\n\n\n

Although the Bank is not publishing any new forecasts, it has tended to enlarge on its decisions in a statement.<\/p>\n\n\n\n

Douglas said: \u201cThe downside risks to the outlook have come into sharper focus.\u201d She cited \u201can upcoming wave of job losses to the challenge of controlling Covid outbreaks to Brexit negotiations\u201d.<\/p>\n\n\n\n

UK inflation also dropped to 0.2 per cent in August, dragged down by the Eat Out to Help Out discount meal scheme. But that was better than the Bank had expected.<\/p>\n\n\n\n

Nomura\u2019s Buckley said that there is a chance Jonathan Haskel or Michael Saunders could vote for more bond-buying during this meeting. They have traditionally been more dovish MPC members, and Saunders recently said it is \u201clikely\u201d more easing will be required.<\/p>\n\n\n\n

What has the Bank of England done so far?<\/h3>\n\n\n\n

The Bank slashed interest rates to a record low of 0.1 per cent from 0.75 per cent in two special meetings in March.<\/p>\n\n\n\n

It also beefed up its quantitative easing programme \u2013 through which it creates money and buys bonds to keep borrowing costs low \u2013 to \u00a3645bn in March. The Bank then increased its bond-buying target to \u00a3745bn in June.<\/p>\n\n\n\n

The MPC has also put negative interest rates in its \u201ctoolbox\u201d of possible measures for the first time.<\/p>\n\n\n\n

However, at its August meeting it did not sound too keen to actually get them out and use them. It said that \u201cnegative policy rates at this time could be less effective as a tool to stimulate the economy\u201d. The Bank added that \u201cthe MPC has other instruments available\u201d.<\/p>\n\n\n\n

By Harry Robertson<\/em><\/p>\n\n\n\n

Source: City AM<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The BoE is preparing to announce its latest interest rate decision tomorrow, as it closely monitors the UK economy\u2019s rebound from the record 20.4 per cent contraction in the second quarter. Since then, there have been many positive signs. 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