Frustration: The Current Round Of Quantitative Easing In The UK

The Central Bank of England has decided to launch a new round of quantitative easing and issue an additional 75 billion pounds (US $117 billion 500 million) over the next 4 months to purchase assets mainly including government bonds to stimulate the growth of the UK economy.

This is the first time that the Bank of England has extended quantitative easing since November 2009, and the time and scale of its launch are slightly higher than before. market "November launched a new round of 50 billion pounds (about 78 billion 400 million U.S. dollars) quantitative easing" universal expectations.

According to the Bank of England, the quantitative easing policy of 200 billion pounds (US $313 billion 500 million) introduced in November 2009 is equivalent to reducing interest rates by 1.5 to 3 percentage points. According to this estimate, the new round of quantitative easing is expected to bring about 0.5 to 1.1 percentage points reduction in interest rates, that is, GDP will increase by 0.75%, and the intermediate inflation rate will also rise 0.3 to 0.6 percentage points.

At present, inflation in Britain has reached 4.5%, much higher than the 2% target set by the Bank of England, and is expected to further rise to 5% next month. The Bank of England is willing to rise at the expense of inflation. It is a failure to launch a new round of quantitative easing before the Federal Reserve and the European Central Bank.

Just the day before the central bank announced the expansion of quantitative easing, the National Bureau of Statistics announced that the UK economy grew by only 0.1% in the second quarter of 2011, down from 0.2% of the previous forecast, and economic growth almost stagnated. The economic predicament led to the question of the coalition government led by Cameron. While the benchmark interest rate has remained at a low level of 0.5% for 32 consecutive months and the chancellor of the exchequer Osborn has insisted on fiscal tightening policy, "quantitative easing" seems to be the only option.

But whether this policy can bring the desired effect as expected, there are different reactions. In theory, quantitative easing can bring about three major impacts: to encourage investors to shift from treasury bonds to riskier stocks and corporate bonds, thereby boosting the stock market and reducing the financing costs of enterprises; increasing the downward pressure on sterling in the short and medium term, enhancing the export competitiveness of British goods and services, increasing the capital reserves of commercial banks, improving their safety and increasing loans to enterprises.

Believe that quantitative easing will be right. Economics The positive optimists stressed that after the introduction of quantitative easing in Britain in 2009, about 200 billion pounds ($313 billion 500 million), the stock market rose. However, some fund managers said they sold treasury bonds and bought stocks and corporate bonds at that time, mainly because of the strong recovery in the US economy at that time.

London's stock market rebounded sharply on the day when the central bank announced a new round of quantitative easing. exchange rate It fell to its lowest level in 1 years. But the sterling exchange rate began to rise in second days, and in recent days, the stock market's rise and fall is more affected by the euro zone debt crisis news.

HSBC analyst Robert Parkes said: "quantitative easing is a huge monetary policy experiment, no one can accurately predict what it will affect or where the money will flow. More importantly, the European debt crisis and the sluggish growth of the global economy could make any effort seem powerless.

Many people are skeptical about the effect of the current round of quantitative easing. They believe that under the current domestic fiscal tightening, it is difficult for the British economy to achieve substantial growth, and any problems in the euro area and the US economy closely related to the UK will have a chain effect on the UK.

Others worry that a considerable portion of the additional money will not be used to buy Sterling assets, but will flow into emerging markets because this has happened since the last quantitative easing policy.

However, despite a wait-and-see attitude toward the effect of quantitative easing, the majority of analysts believe that the Bank of England will continue to expand the scale of quantitative easing in the near future. HSBC research department believes that before March 2012, the BOE will also issue at least 25 billion pounds (about 39 billion 200 million US dollars). Citibank economist Michael Sanders expects the Bank of England to issue at least 225 billion pounds (about 352 billion 600 million US dollars) in the future.