LONDON (Reuters) - It will be the second half of 2014 at least before the Bank of England’s new chief, Mark Carney, changes monetary policy as he grapples with a sluggish economy, a Reuters poll found on Wednesday.
The poll of 66 economists, largely taken after news on Monday of Carney’s appointment as BoE governor starting in July 2013, did not see any top up to the Bank’s 375 billion pound quantitative easing asset purchase program.
They also did not see any shift in interest rates away from their record low of 0.5 percent, until July 2014 at the earliest. That is the length of the polling period.
None of the policy-watchers polled saw any rate move at the next meeting on December 6, or indeed until early 2014.
“The Monetary Policy Committee decisively rejected the option of delivering more QE in November and we expect the committee to follow a wait and see strategy for the time being,” said Philip Shaw at Investec.
In its effort to support an economy that fell into two recessions in the space of four years the central bank embarked on a quantitative easing program, buying up government bonds to boost the money supply and promote growth.
But it has now turned off its printing presses as inflation remains stubbornly above the Bank’s 2 percent target. The poll gave just a median 40 percent chance of more easing — down slightly from 45 percent seen only two weeks ago. <ECILT/GB>
“We don’t expect any additional QE as long as the economy develops broadly in line with our forecasts,” said Chris Crowe at Barclays Capital.
BoE Governor Mervyn King signaled on Tuesday that his successor faces an uphill task, but added the Bank might have to buy even more government bonds to help drag Britain’s economy back to health.
“It may be unreasonable to expect anything other than a slow and protracted recovery,” King told a parliamentary committee, adding the central bank should probably have made clear earlier that a substantial recovery would not come in 2013 and 2014.
Finance Minister George Osborne named Canadian central bank chief Carney on Monday to head the BoE. [ID:nL5E8MQE3X]
When he arrives on British shores Carney will be leaving behind an economy which weathered the global financial crisis quite well to take on one struggling to regain its footing.
A Reuters poll published earlier this month predicted that after shrinking 0.1 percent this year, GDP would grow just 1.1 percent in 2013.
This year’s poor performance comes despite a massive bounce to the third quarter from London’s summer hosting of the Olympic Games. Business surveys are painting a gloomy picture of the fourth quarter and retail sales dropped unexpectedly in October.
Britain has suffered as a debt crisis rages across the euro zone, its biggest trading partner, and as tough government austerity measures have restrained economic recovery.
The Bank of Canada tightened policy in 2010, the first central bank among the Group of Seven industrialized nations to do so. Its economy is expected to grow by double Britain’s rate, 2.0 percent this year and next. <ECILT/CA>
“Although Carney seems to carry a reputation as a policy hawk, the extent to which he favors QE as a policy tool, and his willingness to ‘look through’ periods of above-target inflation, is not clear,” Shaw said.
The latest inflation predictions for the coming four quarters were are at their highest since surveying began for those four quarters, with 2.4 percent for the current quarter, followed by 2.3, 2.4 and 2.3 percent. <ECILT/GB>
Polling by Namrata Anchan and Ruby Cherian. Editing by Jeremy Gaunt.