Markit's Chief Economist Christopher Williamson tells TM his view on today's Bank of England 'non-event'.
The Bank of England left policy unchanged at its September meeting, also making no announcement after the meeting ended to add to the non-event.
The lack of action was in line with market expectations and reflects two main factors. First, the Bank has stated that it wishes to wait to see the impact of the additional quantitative easing sanctioned in July and the newly launched Funding for Lending scheme.
Second, there is a high degree of uncertainty about the health of the UK economy at the moment, and in particular the extent to which disruptions to business arising from the additional holiday for the Queen’s Jubilee have exaggerated the weakness of the economy. PMI data signaled an economic rebound in August, but question marks hang over the sustainability of any upturn. The Bank therefore needs more data to accurately ascertain growth momentum, or lack of it, before committing to further policy decisions. Unfortunately, the picture will probably not become clearer until the fourth quarter.
The OECD has nevertheless piled additional pressure on the Bank of England to act swiftly to stimulate the economy, publishing an extremely downbeat forecast of the UK economy in 2012 – which seems to unnecessarily exaggerate the downturn by ignoring any likely third quarter rebound -and actively urging central banks to not hesitate in a further loosening of policy wherever possible. However, it seems most likely that the Bank will wait until November – when the current round of QE should be completed – before sanctioning more asset purchases, providing the economic data continue to disappoint.
Christopher Williamson, BA, MA (Econ)
Chris Williamson studied Economics at the University of Nottingham and Economic Development at the University of Manchester. Chris joined NTC Publications in 1992 where he led the extension of the company’s business into the field of economic research, including the development of the highly-regarded Purchasing Managers’ Surveys. As Head of Business Development of NTC Economics, Chris helped expand the research business into over 20 countries. Following the acquisition of NTC by Markit in 2008, Chris now holds the position of Chief Economist at Markit and is the company’s principal spokesperson on economic issues, commenting regularly on global economic trends in national and international print and broadcast media.