Will central banks engage in competitive devaluation of their currencies?
*Financial Times, by Javier Blas, August 6, 2009
“The Bank of England’s monetary policy committee on Thursday surprised the markets by voting for a big extension of quantitative easing, extending its size by £50bn to £175bn.
The committee said it expected the announced programme to take another three months to complete. ‘The scale of the programme will be kept under review,’ it said in a statement.
The decision came as a surprise after the MPC had opted not to increase the asset purchases at its two previous meetings, and sent the pound and gilt yields sharply lower.
Interest rates were kept on hold at the record low of 0.5 per cent, as expected.
The committee said the world economy remained in recession, though there have been increasing signs that output in the UK’s main export markets was stabilising. Financial market strains have eased and banks’ funding conditions have improved a little, although financial conditions remained fragile.”
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