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Bank of England surprise markets again

The Bank of England has today shocked analysts in the UK with the release of last month's monetary policy committee minutes showing a surprise move by Gov Mervyn King. Despite the fact that the £50 billion increase in the quantitative easing fund caught many in the city on the hop, the minutes show that Mervyn King actually argued for an increase of £75 billion in the quantitative easing program. As a consequence the UK pound lost ground in the money markets and analysts are finding it very difficult to understand what is going on.

The fact that Mervyn King had argued for a £75 billion increase in the fund would indicate that potentially the UK economy is struggling more than many people had thought. Interestingly, Mervyn King has since issued more downbeat statements after the monetary policy committee meeting last month, in which he claims the UK economy has fallen further than the Bank of England and the UK government had anticipated.

This is a very difficult period in the revitalisation of the UK economy because only a few months ago the UK government and the Bank of England were positive but the vast majority of analysts were more downbeat. The last few days have seen a flip-flop in this particular situation and it is the Bank of England which is pulling down sentiment in the UK.

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