Breaking news: MPC acts to boost growth
THE Bank of England today launched a fresh round of quantitative easing to try and stimulate the UK economy.
The Monetary Policy Commitee gave the green light to a £50bn expansion of the Bank’s QE programme taking the overall total to £325bn.
Analysts had widely expected the MPC to act amid continued concern about growth in 2012 and figures showing the economy contracted in the final quarter of 2011.
However data published this morning showed manufacturing output grew by 1% between November and December and by 0.8% year-on-year while the trade deficit shrank from £2.8bn to £1.1bn.
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Senior stockbroker David Scott said: “The announcement of more QE and base rates staying at a record low was as well flagged as it possibly could be by the bank. Having accumulated 30% of all existing gilt issuance with the previously created money, also at a time when the Government is issuing record amounts of new gilts and credit remains very restricted in the economy, those that argue that QE is just a way for the Government to in effect print its own money to fund the deficit are growing in number.
“As are those that believe QE, by manipulating the interest rate curve, is causing a major problem for UK pension funds which are seeing there deficits increase substantially. This will lead to greater pension contributions and this means less money is therefore less available for investment and job creation, in direct contradiction to the aims of QE.”
Ian McCafferty, CBI Chief economic adviser, said: “The Bank has been signalling that a further extension of the asset purchase programme was likely this month.
“Even though there are tentative signs that the economy is stabilising, the outlook is still highly uncertain. This new round of QE should help support confidence, though the direct stimulus to near-term growth is likely to be limited.”
Chris Parrish, group treasurer at Yorkshire Building Society, said: “The UK economy remains weak and potentially on the brink of another recession as it attempts to manage the effects of the Eurozone crisis and the mounting national debt and this is likely to suppress any rise in the base rate to the back end of 2012 at the earliest.
“Indeed, many economists believe that the first base rate rise will not come until mid-2013, whilst other industry experts believe that a rise won’t occur until 2015.”
