BoE: going late and large in June
- The BoE made no policy change at its May meeting, but two members dissented for £100bn more QE and the flow outlook seems undiminished. Governor Bailey was dismissive of the distinction between its approach and an open-ended one.- How the UK economy performs as lockdown lifts will help calibrate the purchase size. It is related to gilt issuance, even if the BoE cannot admit as much. A £100bn target increase now looks like a minimum announcement in June.
- More prolonged social distancing than assumed would dovishly hit the outlook, especially as the BoE starts from an assumption that supply is little affected in the long-run. I see it as too pessimistic in the short-term but too bullish later.
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