… while Bank economist admits the dangers of QE
QUANTITATIVE EASING could result in unwanted asset bubbles that could prove “costly to rectify”, the Bank of England’s chief economist and monetary policy committee member Spencer Dale said yesterday.
Speaking in Exeter, Dale said he was concerned by the uncertainty surrounding the effects of quantitative easing.
“We do not have much experience of conducting monetary policy via asset purchases and there is a risk that their effects will be transmitted through the economy in ways we do not predict and do not want,” he said.
However, he said that asset purchases had played an important role in improving the rate of growth in the money supply and the decline of corporate bond spreads.
Dale was one of the six MPC members that voted for a smaller increase of £50bn in asset purchases. Three others – including governor Mervyn King voted for a rise to £200bn.
The Bank of England has called an unprecedented meeting of the City’s economists next Tuesday to clear up the confusion surrounding QE and perhaps end speculation that the banks will be charged to hold reserves at the central bank.