Daily Archives: May 22, 2012

Claire Jones

Now that inflation is at a two-year low and the governor can put his best letter-writing pen to one side, should the Bank of England consider doing more to boost the UK economy?

The IMF certainly thinks so.

Today the Fund said the Monetary Policy Committee should print more money and cut the policy rate below 0.5 per cent. This, they argued, would lower yields further out on the curve, which in turn would lower businesses’ borrowing costs.

The Fund also said the Bank should consider buying assets other than government bonds in order to revive the UK’s beleaguered mortgage market and counter tough conditions for businesses. An LTRO-style operation was another option.

Will the Bank follow the IMF’s advice? The MPC might well plump for more QE in the coming months. But, in the short term at least, it is very unlikely to pursue the other measures. Read more

Ralph Atkins

Did the Bundesbank last week try to stop life-saving emergency liquidity assistance for Greece’s banks? That would be a reasonable interpretation of noises from Germany’s central bank — and suggests a dangerous game is being played out in Frankfurt.

The Financial Times reported on Tuesday how at least some Greece banks are being kept alive by about €100bn in “emergency liquidity assistance”, a facility meant to be used only by banks in the direst of need. The massive demand followed the ECB’s decision to exclude four Greek banks from its regular liquidity providing operations because of uncertainty over their future financial strength. Read more