Bank of England officials will probably discuss the threat of a triple-dip recession today and prepare to sit on their hands as a looming change of governor overshadows the remainder of Mervyn King’s term.
With five months before Mark Carney takes over, the Monetary Policy Committee is awaiting results of its credit- boosting program after halting bond purchases and signalling no further interest-rate cuts for now. That backdrop will color today’s “pre-MPC” briefings in London as policy makers discuss new forecasts before their Feb. 7 decision.
“There is that element of ‘wait-and-see’ about things, and that’s not particularly to the advantage of the economic situation,” said Neil Mackinnon, global macro strategist at VTB Capital in London and a former U.K. Treasury official. “It becomes an excuse to wait until the new governor is in place. There is always the danger of policy paralysis.”
Economists predict the MPC will leave its quantitative- easing program and benchmark rate unchanged next week. MPC members’ inertia may reflect concerns that QE has lost its impact, while officials have turned their focus to the success of the Funding for Lending Scheme. Policy makers’ remarks are also increasingly addressing the next governorship and a potential revamp of their mandate in a debate sparked by Carney, who will become the first foreigner to run the Bank of England.
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