UK GDP Drops more than Expected; BoE Members Say Further QE "Likely"

THE TAKEAWAY: UK GDP suffered in fourth quarter -> BoE says QE likely in a bid to increase growth -> Sterling falls on QE fears

Underscoring the growth issues currently affecting the UK, gross domestic product fell more than expected in 2011’s third quarter. The UK statistics office today said GDP fell -0.2% QoQ, more than the expected -0.1% drop.

Concurrently, the BoE minutes release showed that some BoE members said that further quantitative easing measures are “likely.” The BoE’s current asset purchase target stands at GBP 295bln. An increase in quantitative easing would cause decreased Sterling value, but would also stimulate growth by infusing the market with liquidity. The BoE minutes also showed unanimous votes on asset purchase and interest rates.