The Bank of England has privately told bankers that it will continue its quantitative easing. It indicated that it might continue to buy bonds to avoid the pension crisis. The Bank of England originally intervened by buying bonds when several pension funds were in danger of defaulting.
Yesterday, Bank of England Governor Andrew Bailey informed investors that it would stop buying bonds on Friday of this week.
The British economic crisis explained
England’s economic situation collapsed when the newly elected Prime Minister, Liz Truss, and the Chancellor, Kwasi Kwarteng, unveiled their new economic plan. This plan included a proposal for unfunded tax cuts. As a result, the British pound fell sharply against the dollar. Investors also began to dump long-term government bonds.
The Bank of England used quantitative easing to buy the bonds, as the sell-off put several pension plans at risk. Despite the British government’s decision to reverse its plan, the economic crisis continued. The use of quantitative easing was surprising given the surge in inflation around the world and in Britain. Andrew Bailey of the BoE stressed that the bank would not extend its quantitative easing any longer.
However, it appears that it has privately signaled its intention to continue easing after all.
Is a strong crypto-currency rally possible?
The macroeconomic situation continues to dictate price movements in the stock market. Since crypto is highly correlated to the stock market, it is also dependent on the macroeconomy. Quantitative tightening by central banks has led to a massive sell-off in the market. As a result, the Bank of England’s pivot led to a strong rally.
If the UK central bank does indeed go ahead with easing, the crypto market may see a strong rally.
However, the crypto-currency market is more dependent on the US Federal Reserve. It does not seem likely that the Fed will move to easing in the near future. Therefore, any crypto rally will be short-lived.