QE boosts UK money supply
QUANTITATIVE EASING is finally starting to boost Britain’s money supply, according to July data from the Bank of England yesterday.
The Bank’s preferred measure of broad money supply – M4 excluding money holdings of intermediate other financial corporations – rose by 0.6 per cent in July. Even more encouraging was the three-month annual growth rate, which jumped to 5.3 per cent from 1.2 per cent.
The headline broad money figure is estimated to have risen by an annual 3.9 per cent in July.
The Bank extended its quantitative easing programme last month by £75bn because it perceived that the broad money supply remained too weak. Although monthly data is often dismissed as too volatile, economists were cautiously optimistic.
Simon Ward, chief economist at Henderson New Star, said: “Statistics released today are more encouraging, supporting recovery hopes and reducing the chances of QE expansion.”
But Jamie Dannhauser at Lombard Street Research warned against complacency, arguing there was more to be done. “Monetary growth needs to be sustained in the six to eight per cent range in order to ensure recovery in 2010,” he added.