Among the two central bank rate decision scheduled for Thursday morning, the Bank of England’s announcement was considered to hold the more potential. Ever since Governor Mervyn King sided with the minority to vote for an expansion of their quantitative easing program and his suggestion that a cut to the deposit rate could be economically “useful,” the market has priced in the possibility that the Monetary Policy Committee (MPC) could take the next expansionary step in its stance.
However, the central bank once again deferred such an effort when it announced its benchmark would remain at 0.50 percent and they planned to spend the rest of the 175 billion allotted for their bond purchasing program. Weighing in just after the decision, former MPC member David Blanchflower said in an interview that the bank should both increase its bond purchases and cut the rate at which banks earn on their reserves. His comments bear consideration as we have heard musings from active members that follow the same path and considering the economy has shown signs that its recovery is flagging. With a government spending in the pipeline, there is deadline for officials to do as much as they can to jump start and establish financial stability. We will have to look at the minutes of today’s meeting (due Oct. 21st) do see if there was dissention among the voters and further suggest more dramatic measures can be taken at the next meeting (on Nov. 5th) when officials have new forecasts to work with.