The Bank of England is pivoting to quantitative easing to protect the macroeconomic condition in the United Kingdom. The Bank of England will buy long-dated government bonds to restore balance in the UK economy.
The Sterling Pound has fallen to its lowest level against the US dollar after the new UK PM revealed their tax cut plans. Kwasi Kwarteng, the new UK Chancellor, unveiled debt-financed tax cuts.
The International Monetary Fund has also rebuked the newly formed conservative government for its poorly planned tax cut plan.
Bitcoin prices jumped as the news of the quantitative easing came out. However, the prices went down as the dollar strengthened its rally.
The Quantitative Easing Explained
The UK is amidst a full-blown economic crisis as inflation continues to soar. More importantly, the fear of recession has also adversely impacted the macroeconomic situation in the UK. The Bank of England will pivot to quantitative easing as they believe it will restore balance in the economy.
However, market participants are not happy about the central bank’s decision. Many believe that this decision will lead to hyperinflation in the economy. Peter Schiff, a noted economist, and investor, warned of the exact phenomenon.
The monetary policy of the UK has come more into question after the White House has dispelled the fears of a strong dollar. The dollar index climbed more after the quantitative easing news broke in the market.
Will The Federal Reserve Pivot Too
The Federal Reserve currently maintains its hawkish stance against inflation. Neel Kashkari of the Minnesota Fed believes that the interest rates may not be high enough. Susan Collins of the Boston Fed also highlights the importance of maintaining the hawkish stance.
However, Michael van de Poppe, a major influencer and the CEO of Eight Global, reveals that the Fed may have to pivot. The recession fears are beginning to mount as the demand slowdown accelerates.
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