MPC considers New Year QE
THE Monetary Policy Committee has left the door open for an expansion of quantitative easing in the New Year.
Minutes of the Committee’s latest meetings show members were split on whether further action would be needed when the current round of asset purchases ends in February.
However, the committee voted unanimously to maintain interest rates and QE at their current levels this month.
Coverage of the MPC is brought to readers of TheBusinessDesk.com in association with stock brokers Redmayne-Bentley.
Senior stockbroker David Scott said: “The BOE minutes were in reality a non-event as last week’s inflation report told investors everything they need to know, growth in 2012 well be poor at best and inflation likely to come in sharply lower.
“The biggest risk remains the euro zone and the Bank can have little impact here, only watching from the sidelines as events unfold.
“The panel’s nine policy makers voted unanimously to maintain the key interest rate at 0.5% and the size of its asset purchase program at £275 billion, whilst it maintains its holding pattern.
“They therefore held off from buying more bonds in November because policy makers saw little merit in “fine tuning” their stimulus program.”
The minutes reveal the committee’s analysis that the economy is heading for stagnation in the fourth quarter.
David Kern, chief economist at the British Chambers of Commerce,, said: “Since the increase in QE will take some three months to complete, it is not surprising that at its latest meeting, the MPC did not increase the programme further. However, given the risks that the economy faces over the next few months, namely a difficult eurozone situation and increasing UK unemployment, the MPC may be justified in expanding the QE programme further in the early months of 2012.
“The increase in Quantitative Easing will help to sustain demand in the economy, but it would be more effective if the MPC was prepared to purchase private sector assets. This could help improve the availability of credit to businesses.”
