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Bank of England: Divided decisions to stimulate UKs Economy, helping Pounds fall

The policymakers that belong to the bank of England were analyzing this month the possibility to inject another stimulus to the British economy. In this discussion, David Miles and Adam Posen decided to a bigger quantity, of £75 bn boost, in order to increase the money supply and keep the rates under control. The rest of the MPC, nonetheless, voted for a minor stimulus, of £50 bn, that, according to them, is sufficient enough to keep the inflation objective of 2 percent according to their forecasts, and that a bigger number would maybe send a mixed signal to the market: on the one hand, more money means bigger support to financial institutions and creation of new investments and back support for companies, that eventually will help the situation of unemployment; on the other hand, more money in the market means that the market will think the Bank and policy makers were wrong at the beginning in measuring the situation, that it was worse than what they thought.

This program began two years ago, the so called quantitative easing, looking to the creation and increase of money supply, electronically, and the first destination of it was the purchase of government bonds and high rate assets, to £325 bn.

With this new decision, the Bank is telling to the economic agents that the money supply will grow, and by that, the pound will lose value. Actually, the today the GBP/EUR is at 1.1874, a decrease of 0.4445% respect to the market opening, and the trend is set to the fall.

At the same time, the public finances of UK, performed in a positive way, showing a surplus (of net repayment, excluding other financial interventions) of £7.75 bn in January, which is £2.25 bn more than the same month last year.

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Bank of England: Divided decisions to stimulate UKs Economy, helping Pounds fall

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