BOE vs Fed

The bank of England signaled that they may need to keep the bond purchasing program going because of ‘downside’ risks to the recovery.  This has cause the pound to drop to the Dollar as well as other major currencies.  With the Fed set to speak today, one shouldn’t expect the language to be too different from across the pond.  With the purchase program coming to an end the FED may want to reassure investors that it is be committed to repurchasing securities with the proceeds.  This will be a way to calm investors concerned about the implications of the end of the easing program.  

A key difference that should be noted with the two banks is the inflation rate.  With the US still comfortably below its 2% target rate, the US has more room to ease without any concerns about real inflation or the ‘transitory’ inflation that both banks talk about.  England is over double the bank’s target rate, making the possibility of easing longer term more difficult and may require higher rates sooner rather than later.