City divided on how to use quantitative easing money
The Bank of England’s Monetary Policy Committee (MPC) faces a tough decision this week when it meets to discuss its next steps on quantitative easing (QE).
The Bank last week exhausted the £125bn of Treasury money it said it would pump into the banking system, and must now decide at its monthly meeting whether to use the remaining £25bn available to it. The nine-strong MPC faces pressure from some groups to use the funding, but there are concerns about potential longer-term inflation implications .
“It is clear that quantitative easing is not yet fully effective, and we urge the MPC to step up the pace. The size of the programme should be increased without delay, well beyond £125bn,” said David Kern, chief economist at the British Chambers of Commerce.
But analysts are divided, with Investec suggesting that the MPC will stick at the current £125bn level, while IHS Global Insight believes it will use the final £25bn.
However, most City economists expect the committee, which will announce its decision on Thursday, to keep interest rates at the current record low of 0.5 per cent.