Forex Flash: BoE's King explained its QE – TD Securities (Barcelona) - TD Securities were expecting the asset purchases programme to be raised by extra £25B in November, but the BoE maintained its monetary policy as expected by general consensus. Governor King explained that the BoE did fewer asset purchases that it would have done otherwise [if it weren’t for the introduction of the coupon transfer plan], stating in the letter that “the Committee noted that its policy setting would need to take account of the effect of this action, which amounts to a small loosening of monetary conditions. The Committee therefore views the use of coupon income to reduce the stock of outstanding gilts as having an effect similar to the MPC purchasing gilts of the same value”.

“With close to £50bn of coupon payments expected to be transferred to the Treasury by the end of fiscal 2013-14, lowering the government’s issuance needs, the MPC would have seen this as the equivalent of about £8-9bn of QE per quarter over the next year and a half”, wrote Jacqui Douglas, Senior Global Strategist at TD Securities.