- Plans to relax the UK’s deficit reduction programme open up the risk of monetary policy being used to deal with UK debt by inflation.
- The UK has already been through unprecedentedly loose monetary policy with record low interest rates for 83 consecutive months and a £375bn QE programme.
- Risks of persistent loose monetary policy are clear. Asset price inflation, increasing consumer debt, rising inflation and sustaining zombie firms are major risks.
- Government borrowing costs have fallen since Brexit, but counter-intuitively costs to insure against government defaults have increased. Additional risk of investor flight if holders of 0.38 per cent yielding debt may soon face a 2.5 to 3 per cent inflation environment (as currently forecasted).
- Abandonment of deficit targets, political instability and inappropriate monetary policy response could lead to potential recession risk.
Media Impact:
- BBC News: UK interest rates cut to 0.25%
- Wall Street Journal: BOE Policy Worsens Pension Funds’ Headache
- China Daily: Bank of England cuts rates, ready for ‘whatever action necessary’ after Brexit vote
- MarketWatch: BOE rate cut to widen pension fund shortfalls
- NewsMax: Bank of England Cuts Rates for First Time Since 2009, Restarts Bond Purchases
- Yahoo! Finance: Bank of England wields stimulus ‘sledgehammer’ to beat Brexit blues
- Business Standard: BoE cuts rates first time since 2009
- ActionForex: Bank Of England Cuts Interest Rates For First Time Since 2009
- Financial Express: Bank of England cuts rates, ready for “whatever action necessary” after Brexit vote
- Times of Malta: Bank of England cuts rates, seeks stability
- Investment Guru India: Expert Views: Bank of England cuts rates, restarts QE
- Caribbean Broadcasting Corporation: UK interest rates cut to 0.25%
- Metro US: Bank of England wields stimulus ‘sledgehammer’ to beat Brexit blues
- NetIndia: Bank of England cuts rates for first time since 2009, restarts bond purchases
- Yahoo! Singapore News: Bank of England wields stimulus ‘sledgehammer’ to beat Brexit blues
- Channel News Asia: Bank of England wields stimulus ‘sledgehammer’ to beat Brexit blues
- Business News Network: Bank of England cuts rates, wields stimulus ‘sledgehammer’ to soften Brexit shock
