Today the Bank of England Monetary Policy Committee (MPC) announced the decision to launch a further round of quantitative easing to try and kick start the UK economy. The announcement of a further £75bn to be used to purchase government bonds over the next 4 months comes on the back of £200bn already pledged.
The net results of the first round of QE are mixed and are blurred by the uncertainty surrounding the net effect had the MPC not taken the action they did. This strategic direction has been taken in preference to any decisions to move interest rates, with some in the financial sector starting to talk of a further rate reduction and not a rise in interest rates as the more likely tools to try and energise the flagging UK economy.
The stock market has reacted positively to the news following a volatile seven days of trading and I can’t help but think back to the Wall Street Trader, which commented that we are all mistaken if we believe that government rule the world, “Bear Stearns rules the world”, and with every downturn, there will be those that are adept at making money from moving stocks, whilst the unsuspecting armchair investor awaits his annual pension statement with trepidation.