It was revealed today that Britain’s Monetary Policy Committee in their last meeting decided unanimously to “continue with the announced programme of asset purchases.” Following a recent statement from Mervyn King where he announced the possibility of an interest rate cut, the pound plummeted in value, particularly against the euro, as investors priced this news into the market. However the minutes have revealed that the outlook for the UK economy is less negative than has recently been perceived.
There was no indication that the nine members had discussed cutting the remuneration rate that commercial banks were paid for holding their reserves with the BoE. Indeed various statements, sounded an encouraging tone, with “growth in the second half of the year likely to be positive.” The minutes also spoke of the possible “start of a virtuous upward spiral for the economy.” These comments were slightly offset by the lingering prospect of high unemployment and the likely long-lasting drag on aggregate demand from the financial sector. However, of note for investors was that the tone of the meeting was neutral and not the picture of a weak economic recovery that some had forecast.
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