Bloomberg News

Posen Sees Case for Another 75 Billion Pounds in BOE Stimulus

February 14, 2012

Feb. 3 (Bloomberg) -- Bank of England policy maker Adam Posen said he’s “leaning” toward more stimulus next week, and there is a case to increase the bond-purchase target by a further 75 billion pounds ($119 billion).

“75 billion was a good slug last time and there’s a case to do it again,” he said in an interview on Bloomberg Television’s “Last Word” in London yesterday, referring to the central bank’s decision to increase its so-called quantitative easing program in October.

Policy makers will begin a two-day meeting on Feb. 8, when they will have new inflation forecasts that will form the basis for their thinking. While the economy shrank 0.2 percent in the fourth quarter, a survey this week showed manufacturing returned to growth in January.

“I’m certainly at least leaning towards, but who knows, doing more QE if we don’t change the forecast,” Posen said. Still, he added that he’s “slightly more optimistic than I was a few months ago. The global outlook is better.”

U.K. bonds rose immediately after the comments before paring their gains. The two-year gilt was at 0.38 percent late yesterday in London, while the 10-year was at 2.09 percent. The yield on the 10-year government bond declined to 1.917 percent on Jan. 18, the lowest since Bloomberg began compiling the data in 1989.

MPC Review

The central bank has completed its previous four-month round of bond purchases, which increased its target to 275 billion pounds from 200 billion pounds. It said yesterday the Monetary Policy Committee “will review whether the scale of the asset purchase program should be changed at its February meeting, alongside its latest inflation projections.” The MPC will announce its decision at noon on Feb. 9.

A U.K. manufacturing index jumped to an eight-month high in January, Markit Economics said earlier this week. Separate reports showed gauges for Europe, China and India also rose. Still, the debt crisis in the euro area, the U.K.’s biggest export market, has dimmed the outlook for growth, and Bank of England Governor Mervyn King said last week that policy makers can increase stimulus again if needed to aid the economy.

--With assistance from Linda Yueh, Joanna Starritt, Scott Hamilton and Svenja O’Donnell in London. Editors: Fergal O’Brien, Craig Stirling

To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net; Andrea Catherwood in London at acatherwood@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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