Bank of England Governor Mervyn King told lawmakers in London today that his vote for more stimulus, or quantitative easing, this month reflected his concern the global economic outlook is deteriorating.
“What’s concerned me in the last several months, and why I voted for easing in policy, is the worsening in the position in Asia and other emerging markets,” King said. Another reason is that “my colleagues in the U.S. are more concerned than they were at the beginning of the year about what’s happening in the American economy.”
Economists from banks including Deutsche Bank AG, HSBC Holdings Plc and Societe Generale SA forecast the central bank will increase its bond-purchase program by 50 billion pounds to 375 billion pounds at its July 5 meeting.
“Sterling saw no material impact from the BOE testimonies on the Treasury Select Committee,” strategists led by Marc Chandler at Brown Brothers Harriman & Co. in New York, wrote in a note to clients. “Still, the testimony reaffirmed the BOE’s dovish stance. The comments underline expectations that the BOE is more likely to resume QE.”
The Debt Management Office sold inflation-linked bonds due in March 2029 at a yield of minus 0.11 percent. That compares with minus 0.05 percent at a previous auction on April 19. Investors bid for 1.83 times the amount allotted, versus 1.70 times in April.
U.K. government debt has returned 3 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 2.9 percent, and U.S. Treasuries rose 2 percent.