MPC considered more QE
TWO members of the Monetary Policy Committee wanted to see a £75bn expansion of quantitative easing at this month’s meeting, it has emerged.
The minutes from the meeting of the Bank of England’s rate-setting committee show that David Miles and Adam Posen disagreed with the eventual decision to grow the QE programme by £50bn.
According to the minutes, those pushing the bigger figure were worried about a “prolonged period of depressed demand” that would force inflation below the Bank’s 2% target.
However, they were outvoted by seven members who were concerned a larger increase “risked sending a signal that the Committee thought the economic situation was weaker than it was.”
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Senior stockbroker David Scott said: “The Bank of England’s Inflation Report, issued last week, suggested that significant additional easing was unlikely, with one of the arguments for increasing the Bank’s programme recently by £50bn rather than £75bn being that a larger injection of liquidity could send out an overly negative message about the UK’s economy.
“These minutes are therefore interesting in that they show that David Miles and Adam Posen both voted in favour of the Bank boosting its easing programme by the larger amount, indicating that the MPC’s appetite for quantitative easing is growing.
“Whilst Posen’s stance comes as no real surprise, Miles is. With the MPC’s forecasts on growth and inflation based on more optimistic expectations that most, more experimental QE look likely, especially if Greece implodes.”
The British Chambers of Commerce urged the Bank of England to think more creatively about its approach to QE.
Chief economist David Kern said: “We feel that QE would be more effective if the MPC also purchased private sector assets, rather than focusing exclusively on gilts.
“In the upcoming Budget, we urge the government to reallocate priorities within its deficit-cutting plan and announce a package of measures to boost business growth.”
