HALISTER1: Goldman Expects BOE to Implement Credit-Easing Policy in August

Goldman Expects BOE to Implement Credit-Easing Policy in August

(Bloomberg) -- BOE to start a credit-easing policy next month, including purchases of IG, GBP-denominated non-financial corporate bonds, Goldman Sachs analyst Andrew Benito writes in client note.
  • Expects central bank to reveal plans to buy GBP100b over 6 months, including GBP50b of private-sector assets in Aug., sees strong signal of the program at the July meeting
    • Bank to also cut rates by 25bps in August; sees 30% chance of a cut in July
    • Buying private-sector assets on a relatively large scale will distinguish this program from prior QE
    • The Treasury specified an indemnity for the BOE for any losses incurred from private-sector purchases up to GBP50b in early 2009; expects the HMT to authorize an indemnity of that size again
    • Also expects the FLS scheme to be expanded
  • NOTE: Former BOE policy maker Danny Blanchflower said BOE has scope to buy corporate bonds on June 27
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Andrew Benito (Goldman Sachs International)
David Blanchflower (Trustees of Dartmouth College)

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