Halister News

(Bloomberg) -- BOE is probably done with base rates and pretty much with QE; the problem isn’t liquidity in the banking system or the cost of debt in the corporate sector or of any other asset, Eric Lonergan, macro investment fund manager at M&G Investments, says in interview.

• The new long-term TFS funding scheme though means the BOE now has a contingency policy; if things get worse it could extend the program and cut the interest rate without changing the Bank Rate; the question is would it be willing to lose money by pushing rates on the scheme below zero
• Some people would argue this is akin to fiscal policy; not a million miles away from printing money for infrastructure; it’s not about influencing mkt interest rates particularly if the BOE says what the money has to be used for
• Market participants have to re-think the risks of investing in the gilts market and be cognizant we’re approaching levels beyond which central banks are unwilling to go
• That said, investors aren’t at all convinced that politicians are on the same page when it comes to fiscal policy; In Europe fiscal stimulus is virtually illegal, in Japan it’s of a relatively trivial magnitude and it’s still an open question in the U.K. and the U.S.