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It’s the battle of the doves, ladies and gentlemen! How far will the BOE go in order to keep the U.K. economy afloat? Will they go where the BOJ dare not go?

We all know the BOJ’s story. The new Japanese leadership has been forcing the BOJ to step up its game when it comes to driving deflationary demons out of the country. This caused a massive yen selloff as traders anticipated easier monetary policy and currency intervention.

Even before current Prime Minister Shinzo Abe took office, he was already threatening to make drastic changes in the BOJ just to ensure that Japan reaches its inflationary targets. Among these are setting a higher inflation target, meddling in the forex market to weaken the yen, and reducing the central bank’s independence from the government.

These ideas didn’t seem to sit too well with the BOJ Governor back then, Masaaki Shirakawa, who later on decided to step down from office. This eventually led to the appointment of a very vocal dove, Haruhiko Kuroda, as the new BOJ head. Since then, Abe has toned down his comments on changing the BOJ’s mandate as Kuroda has promised to deliver the goods.

On the other side of the globe, the U.K. government seems to be employing the exact same tactics as British officials have also been clamoring for a weaker pound. In fact, BOE policymakers have expressed openness to implementing policies that would help the pound depreciate.

Aside from that, U.K. Prime Minister David Cameron and Chancellor George Osborne have also agreed to replace BOE Governor Mervyn King with BOC head Mark Carney, who has previously promised aggressive monetary policy changes that could offset the negative impact of austerity measures on growth.

Now, there are rumors going around that the British government may be taking it a step further than the Japanese. Word is, changes to the BOE’s charter are happening behind closed doors.

Remember that the BOE is currently tasked to maintain price stability (i.e. keep inflation in check) and support government policies. Price stability has been a challenge for the central bank as CPI expectations are close to their two-year highs. But now, BOE officials insist that they are willing to overlook inflationary pressures for the sake of economic growth.

Some analysts think that this is the bank’s way of priming the markets for drastic changes in the BOE when Carney comes into office in July.

There is also speculation that the BOE charter could be tweaked to mirror that of the Fed. Instead of just targeting inflation, the MPC may soon also start targeting employment and even cash spending on the economy.

If hearsay is true, such a move could imply that the British government is passing on the burden of spurring economic activity to the central bank. I can’t say that I’m surprised. After all, talks of another recession for the U.K. have already begun to spook away investors and Osborne’s Conservative Party is already lagging in the polls.

The good news though is that we don’t have to wait too long to see whether there’s any truth to all of this or none. Chancellor of the Exchequer George Osborne is set to take center stage on March 20 when he presents the annual budget. Analysts are saying that any changes to how the BOE handles monetary policy will probably be announced then.

What could this mean for the pound? Looking at the weekly chart of GBP/USD, I wouldn’t be surprised to see the pair soon drop to its two-year lows around 1.4450.

GBP/USD Weekly Chart