Gilt yields have fallen to a record low as the Chancellor indicated that the Bank of England may be set to introduce more monetary stimulus if the country needs it on the back of the spending review.
Speaking on Thursday, Geroge Osborne said that the coalition government had set out a decisive plan to tackle the Budget, but indicated that policymakers at the Bank may be set to add to the £200 billion of quantitative easing already pumped into the economy.
He said: “This country needs a decisive plan and we’ve set out the decisive plan. It has some caution built into it, there is of course freedom from the Bank of England to deploy monetary tools as well.” (article continues below)
At 8.44am, 10-year gilt yields stood at 3.05%, while two year gilt yields stood at 0.62%.
Minutes for the Monetary Policy Committee’s (MPC) October meeting showed that Adam Posen called for furthet quantitative easing to the tune of £50m.
David Miles, MPC member, said: “The way we have set monetary policy has been extremely expansionary and we still have these weapons if necessary.
“There is still an awful lot of uncertainty in the global banking sector. There is still plenty of risks and things could turn worse.”