Bank of England seen restarting asset buys, but not in March - poll
By Jonathan Cable | February 21, 2013 5:00 AM EST
The Bank of England is more likely than not to fire up its dormant printing presses and inject another wave of cash into the economy before the year is out, a Reuters poll found.
According to the snap poll of 50 economists, taken after minutes from the Monetary Policy Committee's February meeting showed three of the nine members voted for more purchases this month, there is a median 51 percent chance it will happen.
The mean likelihood of an increase was slightly higher, at 55 percent. The poll pointed to the central bank making one more 25 billion pound foray into money printing, taking its total spend to 400 billion pounds.
This is the first poll since October to suggest, albeit only narrowly, further stimulus. 25 of the 37 common contributors in this poll and one taken ahead of the February meeting upgraded their probability for an increase to QE this year.
"The MPC seems to be expecting a relatively decent recovery in the economy this year. Our expectations are that the economy will continue to struggle this year," said Samuel Tombs, UK economist at Capital Economics.
Britain's economy has broadly flat-lined over the last two years and is at risk of sinking into an unprecedented triple-dip recession this quarter.
The BoE only predicts sluggish future growth and a Reuters poll taken last week forecast GDP would grow 0.9 percent this year and 1.6 percent next.
But separate data on Wednesday showed the number of people in work hit an all-time high late last year while a recent purchasing managers' survey showed the country's dominant service sector returned to growth in January.
Governor Mervyn King and two other policymakers wanted to relaunch the programme of asset purchases earlier this month, showing the Bank came surprisingly close to taking more action to support growth.
Wednesday's poll gave a 35 percent chance a majority would fall in behind King and vote for an when the MPC next meets on March 7.
King, who retires at the end of June and was outvoted for only the fourth time since he took office in 2003, was joined by Paul Fisher and David Miles in calling for an additional 25 billion pounds injection.
Michael Saunders at Citi, who has long expected QE to be restarted, noted that on the last two occasions King was outvoted the majority of the MPC as a whole fell in behind him the following month.
"If there are further hints of fragility in upcoming economic data, then a majority for QE may well come together in the next month or two," he said.
Many economists had been reluctant to predict further easing as inflation has remained stubbornly high but the Bank has been taking a more flexible approach to inflation targeting.
That approach is also a hallmark of Bank of Canada governor Mark Carney, who will succeed King in July, though Carney's enthusiasm for bond purchases is less certain.
"The MPC minutes today were about as dovish as they come, given the Committee last week published a forecast for inflation that only just managed to get back to the 2 percent inflation target in three years time," said David Tinsley, UK Economist at BNP Paribas.
"This vote when taken with the Inflation Report projections also highlights that the current inflation targeting framework is being stretched to breaking point."
The MPC did vote unanimously this month to leave Bank Rate at the record low of 0.5 percent this month, where they have been since March 2009, although a cut was considered.
Only two of 50 economists in Wednesday's poll have a rate hike pencilled in over the forecast horizon through to June next year but as in all recent surveys medians saw no change.
(Polling by Somya Gupta and Ashrith Rao Doddi; Editing by Toby Chopra)
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