Tuesday is a big day for quantitative easing watchers in the UK.
As a reminder, markets are holding their collective breath to see whether the Bank of England will vote to increase, pause or end its £175bn asset-purchasing programme at its November interest rate meeting. The programme is due to end that month but there’s been speculation that could be changed.
Adding to the will-they-or-won’t-they QE debate on Tuesday is the BoE’s just-released money supply data:
Seasonally adjusted provisional figures for September are as follows. M4 increased by £14.7 billion, above the average flow for the previous six months of £5.0 billion. The twelve-month growth rate fell to 11.3% from 12.1% in August.
M4 lending increased by £15.9 billion (0.7%) in September. The twelve-month growth rate fell to 6.5% from 7.1% in August.
M4 lending (excluding the effects of securitisations etc.) increased by £18.6 billion (0.7%) in September. The twelvemonth growth rate fell to 7.9% from 8.5% in August.
It’s worth noting that these money supply figures do not strip out the effects of so-called “intermediate other financial corporations” (i.e. they are not the Bank’s preferred measure of M4 ex-IOFC), so they shouldn’t be too closely-scrutinised for QE insights.
More important for QE-watchers will be BoE governor Mervyn King’s speech in Edinburgh later on Tuesday.
In fact, King will be rounding-out the QE-talking quartet of MPC members in recent days, as Monument Securities’ Marc Ostwald explains:
But even more important in the latter respect will be tonight’s speech by Mr King, which may well overshadow tomorrow’s October MPC minutes. The BoE/MPC have over the past week ensured that markets have no clue whatsoever as to what their thinking is, with Bean offering nothing, Capital Markets chief Fisher suggesting a ‘QE pause’ is likely in November, while MPC new boy Posen hinted that he would be in favour of upping the volume of QE if the November Inflation forecasting round offered a justification for it.
As a rule of thumb, Mr King makes about three significant policy speeches per year, and it tends to be those that are made outside of London (rather than say the Mansion House Address or the like) that are the key ones, so tonight’s speech in Edinburgh could prove very significant. we also suspect that the uncertainty about the timing of the pricing of the new syndicated 2060 Gilt (could be Wednesday or Thursday) may well relate to the potential for some QE related Gilt market volatility on Wednesday.
King is speaking at 8:15p.m. UK time and FT Alphaville will be on stand by for anything of interest.
In the meantime, though, it’s worth noting that King has been one of the more aggressive MPC members when it comes to expanding QE.
Related links:
Fishing for QE clues – FT Alphaville
Moving targets, QE edition – FT Alphaville
The November MPC scorecard – 1 – Money Supply