Sterling falls as BoE considers more QE

23rd June 2011

The Financial Times (paywall), reports that there is now a real possibility of another round of QE.

Minutes from the monetary policy committee's June meeting showed that some members believe that the Bank might have to consider more gilts purchases to stimulate the economy, says the report. It was the first time since October that the MPC had discussed QE.

Sterling fell and stock markets reacted sharply on news that the economy might require further stimulus.

The MPC concedes that consumer price inflation could soon exceed the 5% it predicted in May. The latest CPI reading was 4.5%, well above the MPC's medium-term target of 2%.

However, experts say another round of QE is unlikely to be needed over the short-term. "Given the subsequent inflationary performance, an awful lot of bad news will be required before more QE becomes a serious contender," said Stuart Green at HSBC in the Financial Times (paywall).

The pound fell against the dollar before a report that is forecast to show a U.K. retail sales index fell for a second month in June, adds a Bloomberg report.

The decline pushed the British currency down to the lowest level versus the greenback since April 1.

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