Bank of England May Signal Transition to Stimulus Removal – Business Live | Business

Bank of England May Signal Transition to Stimulus Removal – Business Live |  Business

We see a roughly equal chance that the BoE will surprise the markets today by signaling that it will end its planned asset purchases in August, instead of December as previously announced. While such a change would not have major economic consequences, it could surprise the bond markets. Any corresponding rise in gilt yields could trigger a temporary correction in the stock markets.
So far in 2021, the BoE has always surprised the markets by being slightly more hawkish than expected. After providing marketing with expectations in 2020 that it could cut its main policy rate below zero, the BoE changed its tone by crushing those expectations at its February 2021 meeting. Then in May, the BoE surprised the markets by initiating an immediate reduction in its asset purchases.
UK is recovering at breakneck speed with only a slight hit from new spike in SARS-CoV-2 infections. In addition, the inflation data surprised on the upside …
The outgoing BoE chief economist Andy Haldane had previously wanted to curtail asset purchases in May when he backed a reduction in the target for gilt’s stock of purchases from £ 875 billion to £ 825 billion. Such a move would end the additional purchases in August. With inflation risks rising as Haldane had warned, other policymakers might be persuaded to join him and support a similar move at this month’s meeting.

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