BoE Expands Bond Purchase Program, Pound Tumbles

  October 06th, 2011 at 14:50, Vladimir Vyun

Great Britain poundThe Great Britain pound slumped today as the Bank of England held the main interest rates unchanged and expanded its bond purchase program today, signaling about weakness of the UK economy and debasing the nation’s currency.

The Bank of England’s Monetary Policy Committee decided today to keep the official Bank Rate at 0.5 percent. The central bank also increased the size of its asset purchase program by £75 billion to a total of £275 billion.

The bank spoke about the outside tendencies that are negative for Britain’s economic health:

The pace of global expansion has slackened, especially in the United Kingdom’s main export markets. Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally. These tensions in the world economy threaten the UK recovery.

The domestic fundamentals weren’t positive, either. The personal spending remained subdued despite the stimulating measures. The negative outlook for the output growth and the inflation doesn’t promise improvement anytime soon.

GBP/USD dropped from 1.5459 to the intraday low of 1.5270 before trading near 1.5379 as of 14:50 GMT today. GBP/JPY traded at about 117.94, following the drop from 118.68 to 116.94. Meanwhile, EUR/GBP climbed from 0.8631 to 0.8713.

If you have any questions, comments or opinions regarding the Great Britain Pound, feel free to post them using the commentary form below.

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