LGIM favours inflation drop over another round of QE
Continued quantitative easing will not help to restore investors’ confidence in the economy but a fall in inflation rates will provide a “degree of comfort”, Tim Gardner has said.
The co-manager on Legal & General Investment Management’s multi-manager fund range said the latest monetary policy committee notes on the latest round of QE would do little to change LGIM’s house view that more is on its way.
Following the decision of the Bank of England’s MPC to increase QE by another £50bn of bond purchases, taking the overall total to £375bn since the liquidity pumping measures began, Mr Gardner said: “Although two members voted against this £50bn expansion, the minutes overall did little to change our view that additional purchases could well be necessary before the year is out.”
He said it was notable that the MPC took the view that ‘the possible cost of erring on the side of providing a greater stimulus was less than that of providing too little’ and considered a higher amount of bond purchases - £75bn - than the £50bn it decided on ultimately.
Mr Gardner added: “Furthermore, the continued decline in consumer price inflation – which fell from 2.8 per cent to a lower than expected 2.4 per cent in June – will likely provide some degree of comfort to members of the MPC wishing to ease further.”