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UK stands a 40% chance of QE2, says BofA ML

The UK stands a 40 per cent chance of being subjected to a second round of quantative easing, says Bank of America Merrill Lynch.

The suggestion comes from a heightened chance the country will slip back into recession. Uncertainties are markedly higher, after the financial crisis, concerning GDP growth.

“Forecasts may have implied up to around a 30 per cent chance of a recession over the next few quarters, in our view,” says the BofA ML in an economic analysis.

Equally, the Bank of England has given a 30 per cent chance to Consumer Price Index inflation remaining at 4 per cent or more in the first half of 2012.

An analysis by the group has concluded it is likely the Bank would avoid another round of quantative easing until £50 billion was warranted. The report stresses the uncertainty of this, however

On the subject of what form another round of QE would take, the group says; “We think that any further monetary policy loosening by the BoE would be similar to QE1: heavily skewed towards gilt purchases.”           

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