BoE to deliver more monetary easing soon – Wells Fargo

Analysts at Wells Fargo, expect the Bank of England (BoE) to announce a further £100B increase in its asset purchase target to £845B at its early November meeting. They expect the pound to remain a laggard among the G10 currencies.

Key Quotes: 

“Given the sluggish start to the U.K. economic rebound, a restrained outlook for the U.K. consumer and an underwhelming outlook for U.K. businesses, we expect the BoE will deliver more monetary easing soon. Market speculation has centered on whether any further easing might include a shift in U.K. policy interest rates into negative territory, a further expansion in asset purchases, or a combination of the two.”

“Central bank governor Bailey downplayed the likelihood of such a move, saying the BoE had not reached any judgement on whether to introduce negative interest rates, and that other tools were available if necessary. Instead, we expect Bank of England monetary easing to take the form of a further increase in asset purchases, especially with cumulative asset purchases (currently around £699B) quickly closing in on the overall asset purchase target of £745B.”

“To help sustain the recovery, our view remains that the central bank will announce a further £100B increase to its asset purchase target to £845B at its early November meeting. We believe that is an outcome that is substantially—but not yet fully—priced into markets, and as a result we think that further monetary easing could be a restraining factor for the British pound. Given the less-than-compelling outlook for the U.K. economy and the likelihood of further monetary easing, we expect the pound to remain a laggard among the G10 currencies.”