Bank of England can reverse QE without hurting economy: Vlieghe

Bank of England can reverse QE without hurting economy: Vlieghe

26/09/18, 07:18 am

(Sept 26): The Bank of England can reverse its huge bond-buying stimulus programme without sharply pushing up long-term interest rates and hurting the economy, as long it explains the plan properly and moves only gradually, a top BoE policymaker said on Tuesday.

Gertjan Vlieghe said the careful messages sent out by the US Federal Reserve about the reversal of its quantitative easing (QE) programme had avoided sending the wrong signals about how fast it will wean the US economy off its crisis-era stimulus.

The BoE said in June it might start to unwind the 435 billion pounds ($778.7 billion) of government bonds it has amassed since the financial crisis once its benchmark interest rate reaches 1.5%, double its current level.

“Understanding the main channels through which QE works is going to be very important when it comes to unwinding QE,” Vlieghe, one of the central bank’s nine monetary policymakers, said in a speech at Imperial College in London on Tuesday.

His speech challenged the BoE’s view that QE works mostly through “portfolio rebalancing,” or the idea that a central bank’s government bond purchases force investors to buy other assets like corporate bonds, helping the economy.

Vliehge argued that QE shaped expectations of future policy steps which “implies that unwinding QE need not have a material impact on the shape of the yield curve, or indeed on the economy, if properly communicated and done gradually”.

JP Morgan economist Allan Monks said Vlieghe had presented a new case for the view among policymakers that QE had a more powerful impact on pushing rates down when a central bank buys bonds than on pushing rates up when the purchases are unwound.

Vlieghe said economists should look back into history for where rates might be heading.

He said the yield curve - the difference between the return on short and long-term debt - had been flat in the period before World War One, when the gold standard was still in force.

Since the BoE was granted independence in 1997, Britain’s inflation and inflation risk fundamentals had been more similar to the gold standard period than the 20th century average.

“So we should expect yield curves to be flat again on average,” he said.

He repeated his view that one or two interest rates hikes a year would be needed for the BoE to meet its 2% inflation target.

UnUsUaL reports 32% higher FY19 earnings of $13.2 mil on improved revenue & margins

SINGAPORE (May 27): UnUsUaL Limited has reported $13.2 million in net profit for the FY19 ended March, representing a 32% increase from FY18 net profit of $10 million due to higher revenue and improved margins. Revenue for the full year rose 22.6% to $56.9 million compared to $46.4 million a year ago. The topline growth was mainly attributed to higher revenue contributions from the company’s Promotion and Others segments. In line with the higher revenue, gross profit grew by $5.1 million to $23 million for the full year, while operating expenses increased 16.6% to $6.9 million. G....

Bukit Sembawang sinks into the red with 4Q losses of $11.6 mil on one-off impairment, allowance

SINGAPORE (May 27): Bukit Sembawang Estates sank into the red with losses of $11.6 million for the 4Q18/19 ended March, compared to earnings of $22.0 million a year ago. This represented losses per share of 4.46 cents for 4Q18/19, compared to earnings per share of 8.48 cents in 4Q17/18. This was mainly attributable to a surge in other operating expenses to $22.0 million during the current quarter, from $1.5 million a year ago. The increase was mainly due to impairment loss of $9.7 million on property, plant and equipment relating to Fraser Residence Orchard, Singapore, and allowance o....

CapitaLand Mall Trust upgraded to 'buy' by UOB on Jurong Lake District plans, Funan launch

SINGAPORE (May 27): CapitaLand Mall Trust will benefit from the development of Jurong Lake District (JLD) as it has three retail malls located within Jurong Gateway, says UOB KayHian. See: CapitaLand Mall Trust declares 3.6% higher DPU of 2.88 cents on higher income IMM Building, JCube and Westgate, which in total accounts for 20% of CMT’s portfolio valuation, are located within Jurong Gateway and adjacent to Jurong East MRT station. Meanwhile, Funan, which is about 90% pre-committed for retail space and 98% pre-committed for office space, is scheduled to open next month. See als....