The Bank of England’s decision not to extend its Quantitative Easing programme might come as a bit of a surprise – many pundits had been talking up the odds of a further expansion.
In today’s meeting the Monetary Policy Committee will have had the lastest inflation report to hand (we won’t see it for another week) so perhaps this decision gives some hints as to the contents.
Certainly the recent data has been more upbeat with a return to growth, and inflation finally heading in the right direction, giving grounds for optimism.
That said, inflation still above the 2% target and if (as we’ve noted before) it remains persistently high the Bank is going to have a hard time justifying yet more inflationary asset-buying. In fact if the latest report indicates higher inflation feeding through, minds may have to turn to how we’re to unwind some of that.
Could the radical option of a rate rise next May be back on the cards?