MNI Review: BOE MPC Extends QE, Slows Pace Of Asset Purchases

--BOE's Broadbent Says Stock Of QE Is Key

--Negative Rates Not Discussed

By David Robinson

     LONDON (MNI) - The Bank of England delivered, as expected, a GBP100 billion

increase in its asset purchases on Thursday but announced a marked slowing in

the pace of gilt buying, after its June meeting.

     The Monetary Policy Committee said it would take until "around the turn of

the year" to complete the asset purchases, suggesting it will halve the rate of

its buying, after having been on track to complete an initial GBP200 billion by

the end of July. Gilt yields rose.

     At the press conference BOE Deputy Governor Ben Broadbent downplayed the

significance of the slowing in purchases, saying that outside of periods of

market instability the stock not the flow of QE was what mattered. He said

models which assumed that flows mattered were not good indicators of gilt

prices.

     --MARKET FUNCTIONING

     With markets now fully functional the importance of the pace of purchases

fades away, Broadbent said, in contrast to March, when spiking yields and

disappearing liquidity meant it was essential to quickly increase central

reserves, used for asset purchases.

     BOE Chief Economist Andy Haldane voted against the QE increase, with

minutes recording that he highlighted better-than-expected activity data.

     However, Broadbent said that while there was upside news on output relative

to the BOE'S forecast, there was a risk unemployment could be higher than

foreseen, partly because the high numbers of people who had been furloughed --

left employed but not working -- risked being made redundant when government

income support ended.

     "Labour market news is probably more relevant when it comes to inflation,"

Broadbent said.

     The MPC meeting saw no discussion of more radical policy options.

     Bailey said negative interest had not been discussed and were not an active

policy issue and stressed that the MPC was not doing yield curve control.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MT$$$$,MX$$$$,M$$BE$]