Thursday, November 05, 2009

ECB, Bank of England To Trim QE

The ECB and the Bank of England today both signalled that they will trim, but not yet end, their quantitative easing (or "emergency liquidity measures" as the ECB calls them).

Both the Euro area and the U.K. is likely to see inflation rise in coming months. The increase will be less dramatic in the U.K., but the U.K. had a lot higher inflation to begin with.

Central bank officials will likely dissmiss this as "temporary" as they are worried that any significant tightening will end recoveries that are fragile at best. Still, they will likely try to gradually withdraw their inflationist schemes, guided by the same belief that Alan Greenspan had in America in 2004-06 that tightening wouldn't weaken the economy if only it was made gradually......