BoE – Following yesterday’s interest rate announcement by the Bank of England Stewart Robertson, Aviva Investors Senior Economist said:
“It will be interesting to see from the minutes whether anyone joined Adam Posen in voting for more quantitative easing. It’s quite possible some did. With activity data still very weak and the Bank clearly willing to “look through” high and rising inflation, further “unconventional” monetary policy would be appropriate and no great surprise. November is a plausible month for this to happen as the Bank will be publishing its quarterly Inflation Report which provides a forum in which to justify any policy changes.”
ECB – Commenting on Trichet’s penultimate press conference Stewart Robertson, Aviva Investors Senior Economist said:
“President Trichet toned down the hawkish language modestly, laying the ground for a softer approach from the ECB over the coming months. Having been on a pretty clearly-defined hiking path as recently as two months ago, the ECB has rightly had to backtrack swiftly in the face of poor to very poor economic news and the severe bout of financial market jitters over the summer. As always, their stance is presented in the light of inflation trends. A month ago, these were described as remaining “on the upside”. Today, they were characterised as “balanced”. But it’s interesting to see that the growth outlook is now one where “risks are on the downside”. Last month, they were “broadly balanced”.
“Further rate rises now look off the cards, and markets have begun to price in interest rate reductions over the next year. This would be welcome, but would represent an embarrassing change of mind at the ECB. The forthcoming change of President could provide an excuse for any policy change, but even that may prove difficult as some will not wish to give any impression that an Italian in charge of the ECB will be “soft” on inflation.”
