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18 Jul 2013
Flash: QE in UK a foregone conclusion? – RBS
FXstreet.com (New York) - Although QE in the UK appears to be off the cards in the near-term (well into 2014) two factors make us cautious about penning its obituary just yet, suggests the RBS Research Team.
Firstly, the UK's dire fiscal metrics and the heavy DMO issuance schedule mean the market may struggle to absorb this new supply in an orderly fashion without some central bank intervention. Secondly, one presumes the Chancellor will not be overly enthusiastic about a rise in the government's borrowing costs at a time when the deficit-reduction process has stalled. “Ruling-out QE forever hardly seems wholly consistent with the Treasury's view of what 'monetary activism' should entail.” the team predicts.
Firstly, the UK's dire fiscal metrics and the heavy DMO issuance schedule mean the market may struggle to absorb this new supply in an orderly fashion without some central bank intervention. Secondly, one presumes the Chancellor will not be overly enthusiastic about a rise in the government's borrowing costs at a time when the deficit-reduction process has stalled. “Ruling-out QE forever hardly seems wholly consistent with the Treasury's view of what 'monetary activism' should entail.” the team predicts.