BoE: refilling Gilt buckets with revisions
- The depths of UK depression do not seem as deep as the BoE expected, but it is still an enormous shock that monetary policy needs to maintain support through.- An increase in the QE programme remains highly likely on 18 June. The £100bn dissent from May is the lower bound on the announcement, in my view. That would not get far beyond maintaining the current £13.5bn/w pace to August.
- Short-dated gilt purchases arguably have a negligible effect now, while exposing fiscal risks. The BoE could get more bang for its buck by operationally shifting its target buckets up to 5-10y, 10-20y and 20+ (from 3-7, 7-20, 20+).
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