BoE’s “all in” monetary policy shift has already hit problems - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that it appears that the BoE’s “all in” monetary policy shift has already hit problems just two days from inception.

Key Quotes

“Notably, the Bank failed to buy enough gilts to match its target on Tuesday as holders have refused to sell with 10-year UK gilts trading at 0.58%, the lowest in a long history. That speed-bump underlines QE can’t save the economy if there is a shortage of investment just as clearly as the 2010-16 productivity slip in the US does.

In short, if the private sector won’t invest to drive productivity growth then the government must. Put another way, QE arguably needs to see expansionary fiscal policy in tandem. Indeed, wasn’t just that conclusively proved by Keynes decades ago? Central bank economists might opt to forget, but with populists howling it would be productive for central banks and politicians to collectively start thinking about the mean. As with the BoJ, so with the BoE, and so soon for many other economies, one would think.”