Mike Amey (pictured), Head of Sterling Portfolios at PIMCO comments on the Bank of England’s decision to cut interest rates…
The Bank of England has revised down their growth forecasts towards zero for the next 12 months. CPI expected to rise to 2.5 per cent by the end of 2017. These are consistent with PIMCO’s expectations for UK growth and inflation. In response the MPC has cut rates, restarted QE, included corporates in the bond buying programme and initiated a new funding scheme for the banks. In short the MPC looks to have used all of the tools market participants had been looking at.
By extending the QE programme over the next six months, and the corporate bond buying programme over the next 18 months, the MPC has indicated that it expects to be in easing mode for a good while to come. This has triggered new lows on UK gilt yields and pushed sterling down again this morning. These moves are justified by what is certainly a comprehensive programme, and will support these levels going forward
